ACDE Trade & Development Seminars
Date & time
Resource rich developing countries are identified by the high share of resource exports in GDP or total exports, and low levels of income per capita. We suggest two further typical features: that resource sectors are enclaves, and that foreign ownership of the resources sector is high (net factor income is large and negative). We incorporate these new features into a simple model of internal and external balance, and using this framework we 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 the standard policy response to an export boom could be contractionary. We then estimate, using this new approach, the relationship between foreign ownership and the equilibrium real exchange rate for a panel of resource-rich developing countries.