What is it about?
How should resource-rich economies handle the balance of payments adjustment required after commodity price declines? We estimate export elasticities for a variety of commodities (gold, silver, copper, oil, coffee, cocoa, copra, copra oil, palm oil, rubber, tea, logs, and marine products) with respect to real exchange rates.
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Why is it important?
Our findings show that the Marshall-Lerner condition is satisfied for the resource-rich economy, implying that exchange rate flexibility is practicable. By contrast, we show how the rationing of foreign exchange under the fixed exchange rate regime reduces consumer welfare.
Perspectives
This is the first empirical research that estimated exchange rate elasticities of mining, agriculture, forestry and fishery exports using data from Papua New Guinea – one of the most resource-rich countries in the world. The policy implications obtained in this paper should not only be useful for PNG but also other resource-rich economies.
Dr. Ryota Nakatani
International Monetary Fund
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This page is a summary of: External Adjustment in a Resource-Rich Economy: The Case of Papua New Guinea, IMF Working Paper, January 2017, International Monetary Fund,
DOI: 10.5089/9781484325063.001.
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