A simple model of internal and external balance for resource‐rich developing countries
We present a simple model of internal and external balance that incorporates key features of resource‐rich developing countries (RRDCs). The main result is that ‘government take’—the ratio of fiscal resource revenue to resource output—is a key determinant of the equilibrium real exchange rate (ERER)...
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| Veröffentlicht in: | The Australian journal of agricultural and resource economics 2025-01, Vol.69 (1), p.178-199 |
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| container_title | The Australian journal of agricultural and resource economics |
| container_volume | 69 |
| creator | Davies, M. H. Schröder, M. |
| description | We present a simple model of internal and external balance that incorporates key features of resource‐rich developing countries (RRDCs). The main result is that ‘government take’—the ratio of fiscal resource revenue to resource output—is a key determinant of the equilibrium real exchange rate (ERER) in these countries. Examining the case of Papua New Guinea, which has grappled with foreign exchange restrictions since 2015, we find that about half of the RER overvaluation estimated at 26% in 2019 would disappear if the current low level of government take was to be lifted to its long‐term average. The analysis has two key takeaways for RRDCs. First, changes in the government take require adjustments to the RER and fiscal policy to maintain internal and external balance. Second, economic adjustments to falls in the take are difficult; therefore, policies seeking to stabilise the take over time to promote macroeconomic stability are recommended. |
| doi_str_mv | 10.1111/1467-8489.12589 |
| format | Article |
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First, changes in the government take require adjustments to the RER and fiscal policy to maintain internal and external balance. Second, economic adjustments to falls in the take are difficult; therefore, policies seeking to stabilise the take over time to promote macroeconomic stability are recommended.</description><subject>Adjustment</subject><subject>Developing countries</subject><subject>Fiscal policy</subject><subject>Foreign exchange rates</subject><subject>Government</subject><subject>government take</subject><subject>internal and external balance</subject><subject>LDCs</subject><subject>Low level</subject><subject>real exchange rate</subject><subject>resource taxation</subject><subject>resource‐rich developing countries</subject><issn>1364-985X</issn><issn>1467-8489</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2025</creationdate><recordtype>article</recordtype><sourceid>24P</sourceid><recordid>eNqFkMtKw0AUhgdRsFbXbgdcp517MstQvFIQRKG7YZKc0ZQ0E2datTsfwWf0SUxNcevZnAv_f_j5EDqnZEL7mlKh0iQTmZ5QJjN9gEZ_l8N-5kokOpOLY3QS45IQwoRiI7TIcaxXXQN45StosHe4btcQWttg21YYPvZLYRvbloCdDzhA9JtQwvfnV6jLF1zBGzS-q9tnXPpNuw41xFN05GwT4Wzfx-jp6vJxdpPM769vZ_k8KZmgOmGkUKoEsIIzJSsoGHFMW8IrmlqphJCppFRxpZkTooIMCqm5Ujp13DoFfIwuhr9d8K8biGuz7LP1iaPhVKqUEkZUr5oOqjL4GAM404V6ZcPWUGJ2-MwOltnBMr_4eocaHO91A9v_5Ca_yx8G4w_orXLB</recordid><startdate>202501</startdate><enddate>202501</enddate><creator>Davies, M. H.</creator><creator>Schröder, M.</creator><general>Blackwell Publishing Ltd</general><scope>24P</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>7ST</scope><scope>8BJ</scope><scope>C1K</scope><scope>FQK</scope><scope>JBE</scope><scope>SOI</scope><orcidid>https://orcid.org/0000-0001-7218-8450</orcidid></search><sort><creationdate>202501</creationdate><title>A simple model of internal and external balance for resource‐rich developing countries</title><author>Davies, M. H. ; Schröder, M.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c2419-20b66ceea43265deb20f29a03d17a56445751163692f44de8eb5936697f3af6e3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2025</creationdate><topic>Adjustment</topic><topic>Developing countries</topic><topic>Fiscal policy</topic><topic>Foreign exchange rates</topic><topic>Government</topic><topic>government take</topic><topic>internal and external balance</topic><topic>LDCs</topic><topic>Low level</topic><topic>real exchange rate</topic><topic>resource taxation</topic><topic>resource‐rich developing countries</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Davies, M. H.</creatorcontrib><creatorcontrib>Schröder, M.</creatorcontrib><collection>Wiley Online Library Open Access</collection><collection>CrossRef</collection><collection>Environment Abstracts</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>Environmental Sciences and Pollution Management</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><collection>Environment Abstracts</collection><jtitle>The Australian journal of agricultural and resource economics</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Davies, M. H.</au><au>Schröder, M.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>A simple model of internal and external balance for resource‐rich developing countries</atitle><jtitle>The Australian journal of agricultural and resource economics</jtitle><date>2025-01</date><risdate>2025</risdate><volume>69</volume><issue>1</issue><spage>178</spage><epage>199</epage><pages>178-199</pages><issn>1364-985X</issn><eissn>1467-8489</eissn><abstract>We present a simple model of internal and external balance that incorporates key features of resource‐rich developing countries (RRDCs). The main result is that ‘government take’—the ratio of fiscal resource revenue to resource output—is a key determinant of the equilibrium real exchange rate (ERER) in these countries. Examining the case of Papua New Guinea, which has grappled with foreign exchange restrictions since 2015, we find that about half of the RER overvaluation estimated at 26% in 2019 would disappear if the current low level of government take was to be lifted to its long‐term average. The analysis has two key takeaways for RRDCs. First, changes in the government take require adjustments to the RER and fiscal policy to maintain internal and external balance. Second, economic adjustments to falls in the take are difficult; therefore, policies seeking to stabilise the take over time to promote macroeconomic stability are recommended.</abstract><cop>Oxford</cop><pub>Blackwell Publishing Ltd</pub><doi>10.1111/1467-8489.12589</doi><tpages>22</tpages><orcidid>https://orcid.org/0000-0001-7218-8450</orcidid><oa>free_for_read</oa></addata></record> |
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| ispartof | The Australian journal of agricultural and resource economics, 2025-01, Vol.69 (1), p.178-199 |
| issn | 1364-985X 1467-8489 |
| language | eng |
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| source | Wiley Online Library Journals Frontfile Complete |
| subjects | Adjustment Developing countries Fiscal policy Foreign exchange rates Government government take internal and external balance LDCs Low level real exchange rate resource taxation resource‐rich developing countries |
| title | A simple model of internal and external balance for resource‐rich developing countries |
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