The role of the exchange rate as a shock absorber is often undermined in resource-rich developing countries when they face adverse shocks in global commodity prices. Focusing on Papua New Guinea, which has been grappling with a foreign currency shortage since 2013, this seminar investigates whether an exchange rate depreciation improves the trade balance while evaluating its impact on inflation.
The empirical analysis, using a SVAR model and quarterly data from 1997 to 2019, indicates that the trade balance effect outweighs the inflation effect, suggesting a net benefit from currency depreciation. In addition, the paper identifies external shocks as the primary driver of the country’s real business cycle. Since Papua New Guinea does not have a quarterly GDP measure, this seminar proposes an interpolated quarterly GDP based on key macroeconomic indicators.
The monthly ANU-UPNG seminar series is part of the partnership between the ANU Crawford School of Public Policy and the UPNG, supported by the PNG-Aus Partnership.
This a hybrid seminar held at ANU, UPNG's School of Business and Public Policy MBA Suite and online via Zoom.
Seminar time: 12.30 - 1.30pm AEST and PGT.
