Boom goes the price: giant resource discoveries and real exchange rate appreciation

Torfinn Harding, Radoslaw (Radek) Stefanski, Gerhard Toews

    Research output: Working paperDiscussion paper

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    We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. The size and plausibly exogenous timing of such discoveries make them ideal for identifying the effects of an anticipated resource boom on prices. We find that a giant discovery with the value of a country's GDP increases the real exchange rate by 14% within 10 years following the discovery. The appreciation is nearly exclusively driven by an appreciation of the prices of non-tradable goods. We show that these empirical results are qualitatively and quantitatively in line with a calibrated model with forward looking behaviour and Dutch disease dynamics.
    Original languageEnglish
    Place of PublicationSt Andrews
    PublisherUniversity of St Andrews
    Number of pages28
    Publication statusPublished - 8 Feb 2020

    Publication series

    NameSchool of Economics and Finance Discussion Paper
    PublisherUniversity of St Andrews
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X


    • Carbon subsidies
    • Subsidies
    • Fossil fuels
    • Pollution
    • Energy
    • Carbon


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