Oil prices have plunged recently, affecting everyone: producers, exporters, governments, and consumers. Overall, we see this as a shot in the arm for the global economy. Bearing in mind that our simulations do not represent a forecast of the state of the global economy, we find a gain for world GDP between 0.3 and 0.7 percent in 2015, compared to a scenario without the drop in oil prices. There is however much more to this complex and evolving story. In this blog we examine the mechanics of the oil market now and in the future, the implications for various groups of countries as well as for financial stability, and how policymakers should address the impact on their economies.Read on here [imf.org]
Tuesday, December 23, 2014
Friday, December 19, 2014
Thursday, December 18, 2014
Natural gas is both a geopolitical tool and a target in Israel, where a newfound bonanza of resources has the potential to improve ties with energy-hungry Egypt, Jordan and even the Palestinian Authority.
But the linchpin of this diplomatic push is not an Israeli official, a Middle Eastern king or an American ambassador. It is an oil company in Texas.
Friday, December 12, 2014
Tuesday, December 9, 2014
Monday, December 8, 2014
we’re announcing a new Sovereign Wealth Fund for the North of England so that the shale gas resources of the North are used to invest in the future of the North.The revenues of shale gas are for now still largely illusionary. The question why the UK didn't set up a SWF for for their real revenues from the North sea was discussed in the Guardian [oxcarre.blogspot.com] not too long ago. On the OxCARRE [oxcarre.ox.ac.uk] website you'll find further research on Sovereign Wealth Funds and optimal savings of commodity export revenues.
Tuesday, December 2, 2014
The Dutch disease in reverse: Iceland's natural experiment.
Abundant natural resources brought Iceland a systemically overvalued currency, with adverse effects on the secondary tradable sector. During 2003-2008 another national treasure, the sovereign’s AAA rating, was used to attract foreign capital, elevating the real exchange rate even further. The financial collapse in 2008 left the country with a large foreign debt without the possibility of rollovers in international capital markets. This offset some of the effect of the natural resources on the real exchange rate; in effect, this was the Dutch disease in reverse as witnessed, in particular, by a massive increase in the number of tourists in recent years.
Monday, December 1, 2014
One major difference in how countries may handle this new reality comes from their exchange rate regime. Although the Russian rouble appears to be impacted most [FT.com], or at least receives the most attention, all currencies of oil exporting countries with flexible exchange rates have been tracking the fall of the oil price [FT.com]. In fact, the Russian central recently stopped defending the currency against depreciation recently making it in fact more free floating than previously. The fall in real revenues in terms of their domestic currencies is mitigated by the depreciated currencies. Since governments have a major part of their expenses in the local currencies, the impact of the fall in oil price is partially offset by simultaneous nominal exchange rate depreciation. However, debts to external creditors, in particular those denominated in foreign currency, will become harder to finance. So even countries with floating exchange rates will probably make some adjustments to their budgets.
In contrast, the Venezuelan Peso is fixed against the US dollar. As the central government is heavily reliant on the oil revenues for squaring its budget, the impact of the oil price is stronger [FT.com] relative to the floating exchange countries. Prices of it's bonds have tumbled, reaching an annual yield of close to 20%. Venezuela is reported as having argued the most strongly for an OPEC production cut in order to support the price, but countries that argued for this lost the decision as OPEC decided to leave production unchanged [FT.com].
It should be noted that the oil price dynamics functions more like a looking glass that reveals the true characteristics of governments and an economy. Although Norway may have to make some changes in their budget, their massive savings funds allows them any adjustment to be smooth and balanced. The decisions to manage revenues in this way have been taken years ago, exactly to account for a volatile oil price. The recent Russian assertiveness into its western neighbours, with the EU and US response just adds to the nervousness of the economic prospects. That Venezuela has been mismanaged for years becomes only clearer as the government runs out of cash to finance its unfortunate welfare programs.
Wednesday, November 26, 2014
News Shocks in Open Economies: Evidence from Giant Oil Discoveries
co-authored with Valerie A. Ramey and Liugang Sheng
This paper explores the effect of news shocks on the current account and other macro variables using plausibly exogenous variation in the timing of worldwide giant oil discoveries as a directly observable measure of news shocks about future output ̶ the delay between a discovery and production is on average 4-6 years. We first present a model predicting differential effects for news and materialized shocks on the current account and other macroeconomic variables. Our empirical estimates are qualitatively in line with the predictions of the model. After an oil discovery, the current account and saving rate become negative for about 5 years and then turn positive. Investment rises robustly in the short-run, while GDP does not rise until after 5 years. In contrast to some findings from the news literature, we find that employment falls in response to news.
Available here [rice.edu]
Thursday, November 20, 2014
Emergence of Sovereign Wealth Funds
This paper tests the theoretically founded hypothesis that the surge of SWF establishments is determined by three main factors: 1) the existence of natural resources profits, 2) the government structure and 3) the ability to invest usefully in the domestic economy. We test this hypothesis on a sample of 20 countries that established an SWF in the period 1998-2008 by comparing them to the roughly 100 countries that did not set up a fund in the same period. We find evidence for all three factors. The results suggest that SWFs tend to be established in countries that run an autocratic regime and have difficulties finding suitable opportunities for domestic investments. We do not find the net foreign asset position of a country to be similarly related to the explanatory variables, indicating that the establishment of an SWF is distinct from a national accounting result. We argue that our results indicate that it is relevant to study how an SWF interacts with the domestic economy and government policy.
Thursday, November 13, 2014
- plenty of wind power,
- good electricity connections to Sweden's nuclear power, and Norway's hydroelectric plants (without competition from neighbouring countries),
- hopefully new technology that can bring a transformation in the transport sector. 35 years to go, why not?
Wednesday, November 12, 2014
Mining away the Preston Curve
I estimate the long-term national health and education impacts of mining, with causal
effects identified by historical geological variation in fossil fuel endowments. Countries
with more mining tend to have poorer health and education outcomes than those with
similar per capita incomes, geographic characteristics, and institutional quality. Divergences from the “Preston curves” for health and education can be explained by the size of the mining sector. Income from sectors other than mining tends to deliver better social outcomes and the socioeconomic costs of forgoing future fossil fuel extraction are likely to be overstated.
Thursday, November 6, 2014
The Resource Curse: A statistical mirage?
A surprising feature of resource-rich economies is slow growth. It is often argued that natural-resource production impedes development by creating market or institutional failures. This paper establishes an alternative explanation—a slow-growing resource sector. A declining resource sector is disproportionately reflected in resource-dependent countries. Additionally, there is little evidence that resource dependence impedes growth in non-resource sectors. More generally, this paper illustrates the importance of considering industry composition in cross-country growth regressions.
Wednesday, October 29, 2014
Albertans have long known that their provincial government has shown a lack of discipline when it comes to investing royalty revenues into the Heritage Savings Trust Fund. Meanwhile, Norway has built a massive fund that pays for almost all social services. What went wrong? And is it too late to be fixed?
Those are the questions asked and answered by a ground-breaking new report released today by The School of Public Policy. Authors, Ton van den Bremer and Rick van der Ploeg of Oxford University take a hard look at the state of Alberta's savings.They propose that Alberta becomes much more serious about saving its revenues if it intends to reap benefits from it for the longest possible time.
Read on here [newswire.ca]
for the full report here [policyschool.ucalgary.ca]
Thursday, October 23, 2014
Natural gas is creating a new reality for economies around the world. Three major developments of the past few years have thrust natural gas into the spotlight: the shale gas revolution in the United States, the reduction in nuclear power supply following the Fukushima disaster in Japan, and geopolitical tensions between Russia and Ukraine.
read on here [imf.org]
Wednesday, October 22, 2014
From Boom to Bust: A Typology of Real Commodity Prices in the Long Run
This paper considers the evidence on real commodity prices over 160 years for 30 commodities representing 7.89 trillion USD worth of production in 2011. In so doing, it suggests and documents a complete typology of real commodity prices, comprising long-run trends, medium-run cycles, and short-run boom/bust episodes. The findings of the paper can be summarized as follows: real commodity prices of both energy and non-energy commodities have been on the rise from 1950 across all weighting schemes; there is a consistent pattern, in both past and present, of commodity price super-cycles which entail decades-long positive deviations from these long-run trends with the latest set of super-cycles likely at their peak; these commodity price super-cycles are punctuated by booms and busts which are historically pervasive and becoming more exacerbated over time. These last elements of boom and bust are also found to be particularly bearing in determining real commodity price volatility as well as potentially bearing in influencing growth in commodity exporting economies.
Obtain here [sfu.ca], underlying data available at his website.
Tuesday, October 21, 2014
Monday, October 20, 2014
read or listen.
Ps. Self-advertisement warning! I'll exactly address that last question in my seminar next week :)
The economist [economist.com] wrote last week about the consequences of high-investment projects, that rely on higher prices to be profitable (in the long run). This includes shale in the US which on average runs on projects that break-even at US$75 [FT.com], although there is obviously variations among project, and oil-spot prices may be less relevant as producers have there prices hedged using options and forward contract.
Russia relies on US$100+ oil to balance its books, although it's floating ruble and accumulated reserves will form a cushion for the immediate future writes mr. Guriev (a Russian economist currently at Science Po) in the FT [FT.com].
One of the reasons oil prices are down is probably the same as the reason for abysmal stock-market performance in the last month or so, with major losses during the past week: expected weak demand from a slowing world economy. Nevertheless, the CEO of BlackRock, a major US investment institution, Fink saw the silver lining [FT.com]: "It's a good buying opportunity (...) the oil price decline is a tax cut for global consumers."
This week's Economist [economist.com] asks whether it is indeed lower demand that brought oil prices down, indicating a slowing economy, or increasing supply from OPEC, the US and even Russia. Boringly, as always, probably a bit of both. All of the potential consequences mentioned above will only realise, if at all, when the price of US$100 will become the new normal for the foreseable future, or whether instead it is the large price swings in relatively short period, i.e. volatility, that is the major feature to follow.
Friday, October 17, 2014
The article mentions that there are more reports to be expected in the near future coming up with their own estimate.
The trick is always to come up with prices that are not observed. For instance, Earlier this week we listened to a presentation that suggested that the social cost of carbon was 10x higher than the usually suggested $30/mtc just because uncertainty around climate outcomes had not been factored.
Thursday, October 16, 2014
Dutch Disease and the mitigation effect of Migration: Evidence from Canadian provinces.
This article evaluates whether immigration can mitigate the Dutch disease effects associated with booms in natural resource sectors. We derive predicted changes in the size of the non-tradable sector from a small general-equilibrium model à la Obstfeld–Rogoff. Using data for Canadian provinces, we find evidence that aggregate immigration mitigates the increase in the size of the non-tradable sector in booming regions. The mitigation effect is due mostly to interprovincial migration and temporary foreign workers. There is no evidence of such an effect for permanent international immigration. Interprovincial migration also results in a spreading effect of Dutch disease from booming to non-booming provinces.
The Economic Aftermath of Resource Booms: Evidence from Boomtowns in the American West
The current U.S. oil and gas boom is injecting labour, capital, and revenue into communities near reserves. Will these communities be cursed with lower long run incomes in the wake of the boom? We study the oil boom-and-bust cycle of the 1970s and 1980s to gain insights. Using annual data on drilling to identify western boom-and-bust counties, we find substantial positive local employment and income effects during the boom. In the aftermath of the bust, however, we find that incomes per capita decreased and unemployment compensation payments increased relative to what they would have been if the boom had not occurred.
Monday, October 13, 2014
Norway is right to reassess its sovereign wealth fund
Norway’s sovereign wealth fund is the largest in the world. As such, it has prompted discussions about its design. This column argues that one flaw in the fund is that it doesn’t consider oil reserves beneath the ground. Changing the equity/bond mix and the spending rule could lead to significant welfare improvements.
Wednesday, October 8, 2014
Speaker: Thomas Lontzek (University of Zurich)
The Impact of Economic and Climate Risks on the Social Cost of Carbon
There is great uncertainty regarding the future of the economic system and regarding future climate conditions, uncertainty that is important for current and future policy making. We develop a multidimensional model that can be used to study the impact of uncertainty and risk in the economic and climate systems on the social cost of carbon. We find that economic and climate uncertainty each imply that this cost is a stochastic process even more uncertain than the economic and climate systems. Uncertainty tends to imply a greater social cost in the current decade, but has much more significant implications for the future. In particular, there is a significant probability that by 2100 the social cost of carbon will be ten times the value implied by the same models under conditions of no uncertainty. These findings are robust with respect to alternative specifications of recursive utility and exogenous risks.
Monday, October 6, 2014
New Research: Current accounts and oil price fluctuations in oil-exporting countries: The role of financial development
Current accounts and oil price fluctuations in oil-exporting countries: The role of financial development
Oil-exporting countries usually experience large current account improvements following a sharp increase in oil prices. In this paper, we investigate this oil price-current account relationship on a sample of 27 oil-exporting economies. Relying upon the estimation of panel smooth transition regression models over the 1980–2010 period, we provide evidence that refines the traditional interpretation of oil price effects on current accounts. While current accounts are positively affected by oil price variations, this effect is nonlinear and depends critically on the degree of financial development of oil-exporting economies. More specifically, oil price variations exert a stronger impact on the current account position for less financially developed countries, this influence diminishing with financial deepness.
Thursday, October 2, 2014
The Political Economy of Policy Volatility in Latin America
Tuesday, September 30, 2014
See reports on this here [reuters.com] and here [vice.com], or tomorrow's Radio 4 Today On Demand service (around 7h20).
Monday, September 29, 2014
The Local Wealth and Health Effects of Mining in Developing Countries
Do residents of mining communities face health-wealth trade-offs? We conduct the first extensive assessment of this question using micro-data from communities near about 800 mineral mines in 44 developing countries. Mining communities enjoy a substantial medium-term rise in asset wealth (0.3σ), but experience a ten percentage point increase in anemia among adult women, and a five percentage point increase in the prevalence of stunting in young children. Prior evidence links both of these health impacts to metal toxicity – and in particular, exposure to high levels of lead. We find no systematic evidence of general ill health in mining communities, and we observe health impacts only near mines of a type where metal pollution is to be expected. Benefits and costs are strongly concentrated in the immediate vicinity (≤ 5km) of a mine. We employ seven distinct identification strategies. Baseline results come from a cross-sectional group effects model, and mine-level and mother-level panels. An in- strumental variables approach serves as a robustness check. To demonstrate that the observed health impacts are due to pollution, we develop three difference-in-difference tests tailored to the known association of certain mine types with heavy metal pollution, and to the pathophysiology of lead toxicity. Our results add to the nascent literature on health impacts near industrial operations in developing countries.
Friday, September 26, 2014
Oil and ethnic inequality in Nigeria
Early-life oil prices predict differential adult outcomes across Nigerian ethnic groups. Our difference-in-difference approach compares members of southern ethnicities to other Nigerians from the same birth cohort. Greater prices in a southern individual’s birth year predict positive outcomes, including reduced fertility, delayed marriage, higher probabilities of working and having a skilled occupation, and greater schooling. By contrast, health outcomes suffer, including reduced height and increased BMI. No single ethnicity drives our results. Fertility, higher Southern incomes, greater Southern conflict, declining food production, and reinforcing parental investments help explain these results. Religion and selective mortality do not.
Although available online, perhaps better contact authors directly for a draft.
Tuesday, September 23, 2014
In addition, in an analysis piece, this action is explained as part of a bigger movement ahead of the New York climate meeting this Tuesday and Paris meeting in December next year. Apparently there exist a broad bases among businesses around the world that action is needed.
Both pieces make some interesting notes.
"The World Bank announced at Monday’s meeting that more than 1,000 companies and investors had expressed support for putting a price on the carbon dioxide emissions from burning fossil fuels that drive climate change. They include Shell, which has had an internal carbon price for some years, as well as Nokia, LG Electronics and Lego. A total of 73 national and 11 regional governments responsible for 54 per cent of global greenhouse gas emissions are now pricing carbon or plan to do so, the World Bank said, including China, the EU, and several US states."This is currently on the front page of the World Bank website, further here [worldbank.org]
"the rise of a fossil fuel divestment movement that argues investors need to be mindful that most of the coal, oil and gas reserves in publicly listed companies need to stay in the ground if the world is to avoid a potentially dangerous 2 degrees Celsius of global warming from pre-industrial times."something blogged on earlier, and appears to originate from the NGO Carbon Tracker [carbontracker.org].
The FT further writes that these divestments from the 'oil majors', such as now announced by the Rockefeller fund, remains relatively modest in respect to the size of the big oil companies and is therefore not likely to move their stock prices. And if they do, it will probably just increase the yield, since the companies themselves are pretty confident that demand for their product, and with that their profits, will remain robust for the near and medium term future.
However, if yield for investors mirrors the funding cost of the companies' projects, we can expect perhaps two responses: 1) more action in renewable energy from the oil companies to compensate for their image and thereby provide some reasons for investors to stay, or 2) more debt financing by banks or through bonds. A quick check shows that the oil majors are about 50/50 financed by equity and debt, of which long-term debt is really just a minor stake (less then 10% for shell and Exxon, a bit more for BP).
Anyways, first the share price will need to be affected by the divestment operations before any of this is going to happen. Rockefeller representatives themselves called it for now "symbolic".
Thursday, September 18, 2014
Battle for oil fuels Africa’s lengthy conflict
"But the drilling at the block known as Cap Boujdour is highly controversial: detractors insist it is outright illegal; supporters disagree, even though many also acknowledge that the campaign will test international law. The reason is the complex status of Western Sahara, the world’s only non-self governing territory without a legal administering authority.The question will be what happens to the frozen conflict if oil is found? Would it provide a basis for establishing peace and provide opportunities for development of all peoples in a way they wish?
The debate centres around a UN legal ruling from 2002 that drilling in the territory would be legal if it were done for the “benefit of the peoples” living there."
Tuesday, September 16, 2014
Causal interactions between CO2 emissions, FDI, and economic growth: Evidence from dynamic simultaneous-equation models
In this article, we investigate the causality links between CO2 emissions, foreign direct investment, and economic growth using dynamic simultaneous-equation panel data models for a global panel of 54 countries over the period 1990–2011. We also implement these empirical models for 3 regional sub-panels: Europe and Central Asia, Latin America and the Caribbean, and the Middle East, North Africa, and sub-Saharan Africa. Our results provide evidence of bidirectional causality between FDI inflows and economic growth for all the panels and be- tween FDI and CO2 for all the panels, except Europe and North Asia. They also indicate the existence of unidirectional causality running from CO2 emissions to economic growth, with the exception of the Middle East, North Africa, and sub-Sahara panel, for which bidirectional causality between these variables cannot be rejected. These empirical insights are of particular interest to policymakers as they help build sound economic policies to sustain economic development.
Monday, September 15, 2014
In Brazil, the presidential elections, scheduled for October 5, are affected by a major (alleged) corruption scandal involving the state oil company Petrobas. The Economist reports: "Mr Costa, who ran Petrobras’s refining division from 2004 to 2012, has accused more than 40 politicians of involvement in a vast kickback scheme. The list reportedly includes a minister, three state governors, six senators and dozens of congressmen from President Dilma Rousseff’s Workers’ Party (PT) and several coalition allies." Although it does not appear that Ms. Rousseff is directly involved, it may have happened on her watch, and so benefits her challenger, Ms. Silva [ft.com].
In the UK, the referendum on Scottish independence [economist.com], scheduled September 18, revolves around many things, but there may never have been one if there was no North Sea oil in the first place. However, how much is actually left is still debated [econbrowser.com]. See also our previous posts, here and here, and a recent FT Lex column [ft.com].
Friday, September 12, 2014
Now it appears that we may not be waiting for stuff to come to us, but explore space itself. Notwithstanding the physical barriers, there is a niftier one: the law. VOX [vox.com] reports that the US congress is considering a bill (acronym: ASTEROID) to provide the appropriate regulatory framework and property rights, in order to incentivise future investments. The issue is that a 1967 UN treaty prohibits any nation to expropriate celestial bodies, but allows free use of them. But does this allow private corporations to expropriate bodies (since they are not nations), or is mining (and the stuff you bring back) considered under 'use' (NASA took moon dust/stones back to earth and claimed ownership)? More details on testimonies here [io9.com].
Wednesday, September 10, 2014
Relates to a wider research on the local impact of natural resource industry, e.g. OxCarre's James and Aadland (2011, Maine and Wyoming counties), and Allcott and Kenistorn (WP 2014, US Counties) among others. The last sentence suggests that there is more scope in research on the conditions and determinants at play with respect to natural resource industry at the local level.
Tuesday, September 9, 2014
It has been a bit more than 2 years since 34 mine workers were killed by police in what became known as the Marikana massacre [ft.com], a South Africa based, Lonmin [lonmin.com] owned platinum mine. Protests had erupted over working and living conditions and pay [tandfonline.com]. The fatal riot was featured at the time at the OxCARRE blog, which pointed to the Economist's analysis laying the root cause of the tragedy to government management of mining sector in South Africa.
Controversy existed since the start over whether the police had acted in self-defence in the face of violent mine workers, or had been overly violent themselves. A government inquiry was established and independent researchers have done their own studies. The picture that seems to emerge is that the tragedy was preventable and police may have been instigated by Lonmin executives and/or government to act violently against the protesters (book by Johannesburg based academics [books.google.com], p3; NRC Handelsblad [nrc.nl], in Dutch subscribers only). The inquiry is still ongoing and a few days ago South Africa's deputy president Ceryl Rhamaphosa was accused by the mineworkers' lawyer of having ordered the police to use violence against the mineworkers. Mr. Rhamaphosa denies he acted in such way and stated [ft.com] that "the tragedy 'has to be approached as a collective failure by many role players.'" Mr. Rhamaphosa is currently one South Africa's wealthiest businessmen, at the time of the tragedy a non-executive of Lonmin, and formerly a union leader (and founder) of NUM. NUM was deemed by the mineworkers to be closer to business executives and the government then to their interests, which was one of the reasons they started their 'wildcat' strike or switched alliances to non-government backed unions. In all the strikes, and ultimately the tragedy, are a culmination of the failures to deal with apartheid racial differences, exploitation of migrant workers, including foreigners, and to conduct wage negotiations that result in a fair and supported outcome (Report of government backed labour market research body [lmip.org.za]).
Meanwhile, the Guardian [theguardian.com] reports that Lonmin is planning to restructure (meaning closing or selling some of their mines) after 2 years of bad performance and a 5-month strike this year (its share price has decreased by 60% since the tragedy, but it was already in decline long before that). Lonmin [lonmin.com] denies decisions on the restructuring have been made. Costs have increased as the strikes have led to higher pay for both Lonmin and competitors' operated mines, while platinum prices have decreased [nasdaq.com] over the same period. For instance, AngloAmerican Platinum is also closing its least profitable mines [reuters.com] after miners had negotiated pay increases. Strikes, reducing output up to 5.7% quarter-on-quarter, in turn has had a major impact on South Africa's economy, so much that the economy reported [ft.com] negative economic growth. There are also rumours that the trading giant Glancore was considering decreasing its 2013 acquired 25% stake in Lonmin. These rumours were more or less denied [miningglobal.com]. The closing of mines risks further unemployment for those that are already doing the lowest skill and most dangerous part of the mining operations.
In closing, Bram Vermeulen of NRC Handelsblad [nrc.nl] (in Dutch, for subscribers only) talked to widows of those miners that were killed about the taboo subject of 'second widows'. Migrant mine workers used to have families both at the mine location and their old homes where they had left there families, giving disputes to rights of compensation to the families of those killed workers. Migrant mineworkers are/were actually stimulated not to live in 'workers' hostels but in shanty towns where they could live with girlfriends or second wives. Consequently, they had to split their salaries over two families, which in part explains their demand for pay increases [limp.org.za, p.14].
Friday, September 5, 2014
Interesting details in the report: since the oil needs to be smuggled through middlemen, IS can only sell the oil at a ~50% discount from the world price. The middlemen tend to be locals, and much oil goes via the Kurdish region in Iraq to Turkey and Iran. Trade is done in cash, they hold no international network of bank accounts.
Regarding the last point, this cash is, I presume, American dollars (the report does not say anything about this). There must be piles of cash being stored somewhere, which the report says some intelligent agencies are looking into. The cash is used for recruitment abroad, and "its growing operations and territorial expansion." I'm missing some details here. On the famous Vice News report on Islamic State, you can see locals in the Syrian town of Raqqa, bulwark of IS, still using Syrian cash (see at 21:19, I checked the note, it looks like 100 Syrian Pound [£0.40]). How come this has still any value for use in a society that does not control the supply of it? Anyways, this oil trade generates dollar reserves that are perhaps kept separate of the local economy and is used solely for other smuggling/trade of food, weapons and whatever a typical terrorist organisation needs and cannot produce by itself. IS is also known to raise local taxes, which must be Syrian and Iraqi dollars. So this tax-cash may be used only for their local 'civilian' operations such as running the courts and paying those who patrol the streets to check on 'unislamic' behavior. In general, the details of governance of Islamic State remain largely unknown, which includes its fiscal and monetary policy and how they manage 'their' natural resources.
A while ago there were these startling reports that ISIS had robbed banks in Mosul, Iraq, allegedly taking 500bn Iraqi dinars ($430m) in cash. This, according to the FT, actually never happened. ISIS never even attempted to rob the banks.
update 11/09/2014: See NPR article and podcast.
ps. Many Muslims are not flattered by these people calling themselves Islamic State. An alternative is proposed as QS, but I find not many media using it thus far.
Thursday, September 4, 2014
Tuesday, September 2, 2014
For some academic research on Tax reforms and natural resources at a global scale, see a previous post on a new IMF study.
Thursday, August 28, 2014
Looks like great stuff for research on institutions as well as local economic development in preparation for an Oil boom. If anyone is aware of academic research on this case, let us know!
Wednesday, August 27, 2014
Tuesday, August 26, 2014
Monday, August 25, 2014
This paper estimates the effects of the mining boom in Australia, using a large-scale structural macroeconometric model, AUS-M. We estimate that the mining boom boosted real per capita household disposable income by 13 per cent by 2013. The boom has contributed to a large appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture. However, because manufacturing benefits from higher demand for inputs to mining, the deindustrialisation that sometimes accompanies resource booms – the so-called ‘Dutch disease’ – has not been strong.
More precisely, the authors use the method of creating counterfactuals from a baseline. The counterfactual is the case where no mining boom occurs, while leaving some variables unchanged (i.e. world economic factors) and others to adapt endogenously (i.e. Australian economic factors).
Tuesday, August 19, 2014
Tuesday, July 22, 2014
Monday, July 21, 2014
Tuesday, July 15, 2014
This paper estimates the effect of the shale oil and gas boom in the United States on local economic outcomes. The main source of exogenous variation to be explored is the location of previously unexplored shale deposits [, which is used to] to estimate the localised effects from resource extraction. Every oil- and gas sector job creates about 2.17 other jobs. Personal incomes increase by 8% in counties with at least one unconventional oil or gas well. The resource boom translates into an overall increase in employment by between 500,000 - 600,000 jobs. A key observation is that, despite rising labour costs, there is no Dutch disease contraction in the tradable goods sector, while the non-tradable goods sector contracts. [He reconciles] this finding by providing evidence that the resource boom may give rise to local comparative advantage, through locally lower energy cost. This allows a clean separation of the energy price effect distinct from the local resource extraction effects.
Update 25/08/2014: new webapp of the paper here
Friday, July 11, 2014
Friday, June 20, 2014
The leader of the self-proclaimed state of Donesks was an anti-fracking campaigner in a previous career, and has now banned it, despite an ongoing project of Royal Dutch Shell. The article gives further allegations without hard evidence for Russian influence in Romania and Bulgaria in the support of anti-fracking groups.
Wednesday, June 18, 2014
Tuesday, June 17, 2014
Monday, June 16, 2014
Thursday, June 12, 2014
Wednesday, June 11, 2014
Friday, June 6, 2014
- Mineral resources and conflicts in DRC: a case of ecological fallacy?
- Democratizing for peace? The effect of democratization on civil conflicts
- Disasters and development: natural disasters, credit constraints, and economic growth
Tuesday, June 3, 2014
- establish an office for cheaply transferring the benefits of US government-funded fracking and solar research to Chinese companies
- Pay China to implement these technologies
- Tax carbon-intensive imports
- Increase research funding for solar technology in the US
- Implement a carbon tax or equivalent here in the US
Monday, June 2, 2014
- Economic Journal (forth.): The Economic Aftermath of Resource Booms: Evidence from Boomtowns in the American West
- Resources Policy: Has Bolivia׳s 2006–12 gas policy been useful to combat the resource curse?
- Institute for International Economics: Confronting the Curse: The Economics and Geopolotics of Natural Resource Governance
- Journal of Comparative Economics: Income Growth, Ethnic Polarization, and Political Risk: Evidence from International Oil Price Shocks
- Environmental and Resource Economics: Trade and renewable resources in a second best world
Friday, May 30, 2014
Wednesday, May 28, 2014
Tuesday, May 27, 2014
effects on the secondary tradable sector. During 2003-2008 another national treasure, the sovereign’s AAA rating, was used to attract foreign capital, elevating the real exchange rate even further. The financial collapse in 2008 left the country with a large foreign debt without the possibility of rollovers in international capital markets. This offset some of the effect of the natural resources on the real exchange rate; in effect, this was the Dutch disease in reverse as witnessed, in particular, by a massive increase in the number of tourists in recent years.
Friday, May 23, 2014
Bribes, Favors, and a Billion-Dollar Yacht: Inside the Crazy World of the Men Who Do Oil Companies' Dirty Work
Thursday, May 22, 2014
Tuesday, May 20, 2014
Monday, May 19, 2014
Tuesday, May 13, 2014
Thursday, May 8, 2014
Tuesday, May 6, 2014
Friday, May 2, 2014
Thursday, May 1, 2014
Tuesday, April 29, 2014
Monday, April 28, 2014
Friday, April 25, 2014
Tuesday, April 22, 2014
Friday, April 18, 2014
Thus the demand for fossil fuels features kinks, each corresponding to the entry price of one substitute. When the entry of a competing substitute may sufficiently deteriorate its market share, the cartel maximizes its profits by inducing the “limit price” that deters the substitute’s production. Limit-pricing equilibria of non-renewable resource markets sharply differ from the conventional Hotelling outcome; for instance, most resource taxes become neutral irrespective of their dynamics. For policies to effectively curb extraction quantities, they must rely on instruments applied on substitutes to fossil fuels.
Thursday, April 17, 2014
Wednesday, April 16, 2014
patterns in carbon emission-to-GDP ratios, known as emission-intensities. For most but not all countries, intensities tend to be hump-shaped with income. I construct a model of structural-transformation that generates this hump-shaped intensity and then show that deviations from this pattern must be driven by distortions to sectoral-productivity and/or fossil-fuel prices. Finally, I use the calibrated model to measure these distortions for 170 countries for 1980-2010. This methodology reveals that fossil-fuel price-distortions are large, increasing and often hidden. Furthermore, they are major contributors to higher carbon emissions and lower GDP.