Policy Challenge of Resource-Rich Developing Countries: Case of Mongolia

Byambasuren, Tsenguunjav and Erdenebold, Uranzaya and Otgonbayar, Baasansuren (2013): Policy Challenge of Resource-Rich Developing Countries: Case of Mongolia.

Abstract

This paper evaluates whether natural resource exports revenue of Mongolia reduces the interest rate spread using single-sector model and studies the cases that decreased their interest rate spread successfully. The results suggest that the difference in quality of natural resource’s expenditure is the key factor of developing stable economy. As witnessed by the examples of Botswana and Sierra Leone, natural wealth can become both of a blessing or a curse depending on the effectiveness of economic and political policies. In other words, if Mongolia spend its resource revenue ineffectively, we will lose our fame in the international market and it leads us to be pegged with high interest rate. Finally, we suggest some policy recommendations for optimal spending of the windfall revenue based on our result.

• Item Type: MPRA Paper
• Language: English
• Keywords: Interest rate spread, Single-sector model, Macro prudent policy of resource-rich country
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C54 - Quantitative Policy Modeling; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy; F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems; H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy ; Legal Institutions ; Property Rights ; Natural Resources ; Energy ; Environment ; Regional Studies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q33 - Resource Booms

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