Investigating the relationship between natural resources export and the real exchange rate of the exporting country’s currency
This project plans to investigate one specific aspect of the ’resource curse’, namely, the relationship between natural resources export and the real exchange rate of the exporting country’s currency. The concepts of ’resource curse’ and ’Dutch disease’ are not new to natural resources exporting countries. Among the 51 countries classified as ’resource rich’ by the IMF, 29 are low - and lower - middle-income countries. It has been suggested that while benefiting from the abundance of natural resources, the exporting country’s currency also appreciates, making other sectors of the economy less competitive. For these developing countries whose export are dominated by their primary resources, fluctuations in the international price of the resources potentially can explain movements in their terms of trade and in the real exchange rate of their currencies.
Indeed, during the recent crude oil price drop, small oil exporting countries like Nigeria, Qazaqstan and Venezuela experienced fast real depreciation of their currencies. However, the earlier researchers could not find general empirical evidence supporting such relationship between the natural resource prices and the real exchange rate (see Cashin et al 2004, Dauvin 2014). This project will contribute to the literature by refining the empirical analysis for a better understanding of the ’commodity currency’ (the relationship between natural resources export and the real exchange rate of the exporting country’s currency). It will also modify the existing models of the real exchange rate and terms of trade (see for example Tokarick 2008) to guide the empirical analysis. The plan is to start with oil exporting countries and later to expand to other natural resources exporting countries.
Applicants interested in this research project should submit a more detailed research proposal (of a maximum of 2000 words) that expands on the broad outline given above.
This project is funded by a University of Aberdeen Elphinstone Scholarship. An Elphinstone Scholarship covers the cost of tuition fees, whether Home, EU or Overseas.
Selection will be made on the basis of academic merit.
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FTE Category A staff submitted: 19.25
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