The Implications of Natural Resource Exports for Non-Resource Trade

Jan 2013 | 103

Authors: Anthony Venables Torfinn Harding

Foreign exchange windfalls such as those from natural resource revenues change non-resource exports, imports, and the capital account. We study the balance between these responses and show that the response to $1 of resource revenue is, for our preferred estimates, to decrease non-resource exports by 74 cents and increase imports by 23 cents, implying a negligible effect on foreign saving. The negative per $1 impact on exports is larger for manufactures than for other sectors, and particularly large for internationally mobile manufacturing sectors. While standard Dutch disease analysis points to contraction of the tradable sector as a whole, division into non-resource exports and imports is important if, as suggested by much development literature, a higher share of exports to GDP is associated with faster growth. The large negative impact of resources on these exports points to the difficulty resource rich economies face in diversifying their exports.

JEL Codes: E21, E62, F43, H63, O11, Q33

Keywords: natural resources, Dutch disease, resource curse, trade, exports, imports

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