Policy Challenge and Single-Sector Growth Model Application of Resource-Rich Developing Countries: Case of Mongolia

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

Abstract

This paper evaluates whether natural resource export 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 the 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 spends its resource revenue ineffectively, its fame on the international market will be lost and leads to be pegged with high interest rate. Finally, the paper suggests some policy recommendations for the optimal spending of the windfall revenue based on the result.

• Item Type: MPRA Paper
• Language: English
• Keywords: Interest rate spread, Single-sector model, Macro prudential policy, 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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