Capital account management could prevent ‘commodity curse’, BIS paper shows

Economic theory implies a positive commodity shock to an open economy can lead to an accumulation of net foreign assets, resulting in a permanent shift of resources out of the traded sector and lower welfare.

However, a paper published by the Bank of International Settlements suggests capital account management and fiscal policies such as a stabilisation fund could prevent this so-called "commodity curse".

Capital account management, authors Enrique Alberola and Gianluca Benigno argue, would