This paper studies how capital-scarce countries should manage volatile resource income. Existing literature recommends that capital-scarce countries invest domestically, but that volatile resource income should be saved in a foreign sovereign wealth fund. I reconcile these by combining a...

This paper studies how monetary policy should optimally respond to an oil discovery.Oil discoveries provide news that the natural level of output will increase in the future. Anticipated increases in natural output lower the natural real interest rate. Optimal monetary policy must accommodate...

As poor countries deplete their natural resources, for increased consumption to be sustainable some of the revenues should be invested in other public assets. Further, since such countries typically have acute shortages of public capital, the finance from resource depletion is an opportunity for...

Natural resource abundance is a blessing for some countries, but a curse for othes. We show that differences across countries in the degree of fiscal decentralisation can contribute to this divergent outcome. First, the paper presents a unified theory that combines political and market...

We theoretically and empirically examine the relationship between natural resource revenues and financial development. In the theoretical part, we present a politico-economic model in which contract enforcement is low and decreasing in resource revenues when political institutions are poor, but...

We hypothesize that natural resources raise income inequality in ethnically polarized societies, but reduce income inequality in ethnically homogenous societies; and we present empirical evidence in support of this hypothesis.

This paper investigates the scope for international rules to address market failures in trade in natural resources and the associated international transactions of prospecting and investment in resource exploitation. We argue that several market failures are likely to have substantial costs....

We study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions. Our game-theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor, but not...

This paper provides an overview of the relationships between natural resources, governance, and economic performance. The relationships run in both directions, with resources potentially altering the quality of governance, and governance being particularly important for resource poor countries....

Countries with substantial revenues from renewable resources face a complex range of revenue management issues. What is the optimal time profile of consumption from the revenue, and how much should be saved? Should saving be invested in foreign funds or in the domestic economy? How does...