Essays on natural resource economics in developing countries

This thesis comprises three papers within the field of natural resource economics in developing countries. In broad terms, this thesis investigates the challenges and opportunities surrounding the macroeconomic management of natural resource revenues in developing economies. It is a mix of theoretical and empirical work covering three distinct but related topics. The first paper, titled "Commodity price shocks, growth and structural transformation in low-income countries", is an empirical investigation of the macroeconomic response of resource-rich, low-income countries to movements in commodity prices. A panel-VAR approach is used to estimate both the dynamic and structural macroeconomic response to global commodity price shocks. The results point to small, but positive, growth and investment responses to commodity price booms. I also find evidence of significant transformation of the sectoral value-added shares in these economies following price shocks, and present evidence of a Dutch disease mechanism at work. The second paper, titled "Surfing a wave of economic growth", investigates whether the geographic determinants of growth extend to natural amenities. It combines data on spatial and temporal variation in the quality of over 5,000 surf breaks globally with data on local economic performance, proxied by night-time lights. The findings 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 Ni˜no events that generate high-quality waves. The effects are concentrated in nearby towns and emerging economies, and population changes are consistent with tourism. The third paper, titled "Pricing sovereign debt in resource-rich economies", investigates 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 negatively 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 these settings.