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

Author/Editor:

Johannes Herderschee ; Ran Li ; Abdoulaye Ouedraogo ; Luisa Zanforlin

Publication Date:

March 12, 2021

Electronic Access:

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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.

Series:

Working Paper No. 2021/073

Frequency:

regular

English

Publication Date:

March 12, 2021

ISBN/ISSN:

9781513572659/1018-5941

Stock No:

WPIEA2021073

Format:

Paper

Pages:

24

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