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Managing the Impact of Resource Booms on the Real Effective Exchange Rate: The Role of Financial Sector Development
Author:
Mr. Johannes Herderschee
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and
Ms. Luisa Zanforlin
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Series:
IMF Working Papers
Volume/Issue:
Volume 2021: Issue 073
Language:
English
Publication Date:
12 Mar 2021
DOI:
https://doi.org/10.5089/9781513572659.001
ISBN:
9781513572659
ISSN:
1018-5941
Pages:
24
Keywords:
Resource-Rich Countries; Financial Development; Monetary Policy; REER appreciation; credit vis-à-vis credit; monetary policy rate; balance sheet management policy; appreciation of the REER; nonrenewable resource wealth; gas resource; Financial sector development; Real effective exchange rates; Natural resources; Sterilization; Financial sector; Asia and Pacific
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Whereas most of the literature related to the so-called “resource curse” tends to emphasize on institutional factors and public policies, in this research we focus on the role of the financial sector, which has been surprisingly overlooked. We find that countries that have financial systems with more depth, as well as those that actively manage their central banks’ balance sheets experience less exchange-rate appreciation than countries that do not. We analyze the relationship between these two findings and suggest that they appear to follow separate mechanisms.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund