Wednesday, November 26, 2014

Today at the OxCARRE Seminar: Rabah Arezki on News Shocks in open economies

Today presented at OxCARRE by Rabah Arezki []

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 [] 

Thursday, November 20, 2014

New OxCARRRE Research: Emergence of Sovereign Wealth Funds

Newly posted at the OxCARRE Research papers, from Jean-Fran├žois Carpantier (University of Luxembourg) and Wessel Vermeulen (OxCARRE)

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

Denmark's 100% renewable energy push

The New York Times, in its series on solutions to climate change, reports on the policy of Denmark to "to end the burning of fossil fuels in any form by 2050 — not just in electricity production, as some other countries hope to do, but in transportation as well."

they keys to success: 

  • 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

New Research: Mining away the Preston Curve

New research from Ryan B. Edwards at the Australian National University,

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

New OxCARRE research: The Resource Curse: A statistical mirage?

Newly posted on the OxCARRE discussion papers, from alumni Alex James, now at the University of Alaska Anchorage,

The Resource Curse: A statistical mirage? 

Forthcoming in Journal of Development Economics

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.