Resource-rich developing countries are different. They obviously have large resource sectors, but these typically operate as enclaves, and most profits are repatriated, so net factor income is typically large and negative. In this seminar, Martin Davies will present the findings of a paper co-authored with Marcel Schröder, which presents a simple model of internal and external balance that incorporates the key features of this class of countries. Using this framework, the authors suggest a new paradigm for policy-setting in resource-rich developing countries. This includes a new equilibrium exchange rate concept, and a number of other interesting results, including the possibility that an export boom could be contractionary. The authors then estimate, using this new approach, a set of equilibrium real exchange rates for a panel of resource-rich developing countries.

Dr Martin Davies is Assistant Professor of Economics at Washington and Lee University. His research interests include international trade and development. He has a D.Phil. from Oxford University, and has taught at the University of Papua New Guinea (UPNG), St John’s College Oxford, and the Foreign Commonwealth Office (UK). He has held a post at the Australian Treasury, and is a visitor to UPNG under the ANU-UPNG partnership.