01952cas a2200241 a 4500 AALejournalIMF018089 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484325063 1018-5941 BD-DhAAL BD-DhAAL Nakatani, Ryota. External Adjustment in a Resource-Rich Economy : The Case of Papua New Guinea / Ryota Nakatani. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (36 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students How should resource-rich economies handle the balance of payments adjustment required after commodity price declines? This paper addresses the question theoretically by developing a simple two-period multi-sector model based on Nakatani (2016) to compare different exchange rate policies, and empirically by estimating elasticities of imports and commodity exports with respect to exchange rates using Papua New Guinean data. In the empirical part, using various econometric methods, I find the statistically significant elasticities of commodity exports to real exchange rates. In the theoretical part, by introducing the notion of a shadow exchange rate premium, I show how the rationing of foreign exchange reduces consumer welfare. Using the estimated elasticities and theoretical outcomes, I further discuss policy implications for resource-rich countries with a focus on Papua New Guinea. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2017/267 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/267/001.2017.issue-267-en.xml IMF e-Library