Pricing sovereign debt in resource-rich economies, Working Paper (2017)
How do commodity price movements affect the ability of a resource-dependent sovereign state to access international capital markets? And what does this mean for how sovereign debt is priced in these settings? This paper aims to shed light on these two questions by investigating the link between commodity price movements and risk premiums in resource-dependent, developing economies. I develop a stochastic general equilibrium model of a resource-rich economy with sovereign debt and endogenous default risk. I show that the bond price is decreasing in the level of indebtedness and positively correlated with the oil price. The model can explain a large proportion of the business cycle fluctuations in interest-rate spreads in resource-dependent, developing economies. Higher risk-aversion, more impatience, larger oil shares and a stronger correlation between domestic output and oil price shocks all help to explain the key macroeconomic co-movements in the this context.
Commodity Price Shocks, Growth and Structural Transformation in Low-Income Countries, Quarterly Review of Economics and Finance (2017)
EconoMonitor: Weathering the Commodities Storm
This paper uses a panel-VAR approach to estimate both the dynamic and structural macroeconomic response of resource-rich, low-income countries to global commodity price shocks. I use a Block recursive ordering, as well as a simple Choleski decomposition, to identify structural commodity price shocks for a set of developing countries. The Block recursive identification strategy assumes only that global macroeconomic conditions do not respond to individual low-income country conditions contemporaneously. The results suggest that a one standard deviation increase in commodity prices (around 19% on average) raises per capita income levels, government spending and investment in developing countries by 0.03%-0.05%. Commodity price shocks also result in significant transformation of these economies, with the share of value-added in manufacturing contracting by 0.25 percentage points; although within this, the share of value-added in agricultural manufactures, for example, expands by around 1.5 percentage points.
This project combines high resolution night-time lights data with population grid data across the world to measure the number of people living in rural poverty. See here for more information.
We investigate whether the geographic determinants of growth extend to natural amenities. We combine data on spatial and temporal variation in the quality of over 5000 surf breaks globally with data on local economic performance, proxied by night-time lights. We document a strong association between natural amenity quality and local economic development. Economic activity grows faster near good surf breaks; following the discovery of new breaks, or the technology needed to ride them; and during El Niño events that generate high-quality waves. The effects are concentrated in nearby towns and emerging economies, and population changes are consistent with tourism.
The Economist: Surfing to success
The Financial Times: Australia seeks to ride the inland surf boom
Bloomberg: Surfing trendsetters can make an economic splash
BBC World: Surfonomics: Las razones de dos economistas de Oxford para estudiar el valor de las olas
Travel & Leisure: What big waves mean to tiny surfing towns
Surfline: Good waves generate estimated $50 billion per year
L’Economiste: Comment les vagues de surf génèrent de la richesse
Fiscal Options for Absorbing a Windfall of Natural Resource Revenues – A CGE Model of Oil Discovery in Uganda, OxCarre Working Paper (2011)
The current debate about the optimal management of foreign exchange windfalls is highly relevant to low income countries such as Uganda, having recently discovered vast hydrocarbon reserves. Using a Computable General Equilibrium (CGE) model for Uganda this paper analyses three broad policy options for the use of oil revenues, increasing i) private consumption, ii) private investment, and iii) public infrastructure investment. The model allows for learning-by-doing in tradables, increasing returns to public infrastructure and the use of an Oil Fund held abroad. The fund allows government to smooth expenditure programs over the medium-term. When public infrastructure is biased towards tradables, a smooth expenditure profile yields higher economic growth than high expenditure skewed to the present. The government’s discount rate plays a key role in determining the optimal use and management of oil revenues. More impatient governments will be inclined to increase current expenditure at the cost of future generations’ welfare and negative distributional implications for poor households. Lower discount rates align the political incentives with respect to inter-temporal welfare and the long-run growth path of the economy.
Poverty in Kagera, Tanzania: Characteristics, Causes and Constraints, PRUS Working Paper (2008)
with Dr. Julie Litchfield
This paper analyses the determinants of household welfare in the Northwest region of Tanzania using microlevel cross section data. Despite having gone through a series of structural adjustment programs in the late-1980s, Tanzania is still considered one of the poorest countries in Sub-Saharan Africa. The paper argues that the determinants of household welfare are numerous and complex, ranging from individual and household to community and social characteristics, but that the relative importance of these factors varies across the welfare distribution. Using quantile regressions, we find that human, social and physical capital all play a significant role in improving households’ living standards, but that the relatively poor are harmed more by weather shocks because they face more constraints in diversifying out of agriculture. Our results also reveal subtle insights into the relationships between gender and poverty.