IMF Working Papers

Managing the Impact of Resource Booms on the Real Effective Exchange Rate: The Role of Financial Sector Development

By Johannes Herderschee, Ran Li, Abdoulaye Ouedraogo, Luisa Zanforlin

March 12, 2021

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Johannes Herderschee, Ran Li, Abdoulaye Ouedraogo, and Luisa Zanforlin. Managing the Impact of Resource Booms on the Real Effective Exchange Rate: The Role of Financial Sector Development, (USA: International Monetary Fund, 2021) accessed November 21, 2024

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.

Summary

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.

Subject: Central banks, Economic sectors, Environment, Financial crises, Financial markets, Financial sector, Financial sector development, Foreign exchange, Natural resources, Real effective exchange rates, Sterilization

Keywords: Appreciation of the REER, Asia and Pacific, Balance sheet management policy, Credit vis-à-vis credit, Financial Development, Financial sector, Financial sector development, Gas resource, Monetary Policy, Monetary policy rate, Natural resources, Nonrenewable resource wealth, Real effective exchange rates, REER appreciation, Resource-Rich Countries, Sterilization

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2021/073

  • Stock No:

    WPIEA2021073

  • ISBN:

    9781513572659

  • ISSN:

    1018-5941

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