From Natural Resource Boom to Sustainable Economic Growth: Lessons for Mongolia

By Pranav Gupta, Grace B Li, Jiangyan Yu

April 30, 2015

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Pranav Gupta, Grace B Li, and Jiangyan Yu. From Natural Resource Boom to Sustainable Economic Growth: Lessons for Mongolia, (USA: International Monetary Fund, 2015) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Some resource-rich developing countries are in the process of harnessing immense mining resources towards inclusive growth and prosperity. Nevertheless, tapping into natural resources could be challenging given the large front-loaded investment, volatile capital flows and exposure to global commodity markets. Public investment is needed to remove the often-large infrastructure gap and unlock the economic potential. However, too rapid fiscal outlays could push the economy to its limit of absorptive capacity and increase macro-financial vulnerabilities. This paper utilizes a structural model-based approach to analyze macroeconomic impacts of different public investment strategies on key fiscal and non-fiscal variables such as debt, consumption, sovereign wealth fund, and real exchange rates. We apply the model to Mongolia and draw policy recommendations from the analysis. We find that fiscal policy adjustment, particularly moderating infrastructure investment and optimizing investment efficiency is needed to maintain macroeconomic and external stability, as well as to boost the long-term sustainable growth for Mongolia.

Subject: Environment, Expenditure, Fiscal consolidation, Fiscal policy, Natural resources, Public debt, Public investment spending

Keywords: Aggressive investment path, Debt sustainability, Efficiency decrease, Efficiency index, Efficiency level, Fiscal consolidation, Global, Investment adjustment cost parameter, Investment capacity, Investment efficiency, Investment expenditure, Investment path, Investment project, Natural resources, Natural resources management, Path total, Public investment, Public investment spending, Resource fund, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/090
Stock No:

WPIEA2015090
ISBN:

9781475570632
ISSN:

1018-5941

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