Nauru, Central Pacific. My childhood home, and a canonical case of the resource curse.

Published Papers

The Elephant in the Ground: Managing Oil and Sovereign Wealth (2016) with van den Bremer, T. and van der Ploeg, R., European Economic Review, 82:113-131 (working paper)

  • Media coverage: VoxEU (10/10/2014); Financial Times (07/03/2014); Wyoming PBS (from 1hr 20min, 24/08/2016)
  • Impact: A Norwegian government commission has recommended that their sovereign wealth fund invest more in equities as oil is extracted, consistent with the recommendations in this paper (section 6). The fund is worth ~$880 billion, and it’s suggested they move from 60-70% equities.
    Press Release (18/10/2016), VoxEU (18/10/2016); Financial Times (18/10/2016)

Resource Funds: Stabilizing Parking and Intergenerational Transfer (2016) with Venables, T., Journal of African Economies, forthcoming (working paper)

  • Resource funds: Stabilization, parking, and intergenerational transfer :: Brookings Institution, 18 September 2015
  • Economic principles for resource revenue management :: IMF Research Bulletin, 16(3), September 2015

Sovereign Wealth Funds and Natural Resource Management in Africa (2016) with Senbet, L., and Simbanegavi, W., Journal of African Economies, forthcoming

An Empirical Sectoral Model of Unconventional Monetary Policy: The Impact of QE (2015) with Cloyne, J., Thomas, R., and Tuckett, A. The Manchester School, Vol 83: 51-82

  • Written during secondment as the David Walton Scholar at the Bank of England.
  • This model is now part of a suite used to inform Monetary Policy Committee decisions.

Securitization, structuring and pricing of longevity risk (2010) with Sherris, M. Insurance: Mathematics and Economics, Vol 46(1): 173-185

Financial Innovation and the Hedging of Longevity Risk (2008) with Sherris, M., Asia Pacific Journal of Risk and Insurance, Vol 3(1): 1-14

Working Papers

Natural Assets: Surfing a wave of economic growth (2016) with McGregor, T., OxCarre Working Paper No. 170, University of Oxford (slides May 2016)

Many natural assets can not be valued at market prices. Non-market valuations typically focus on the value of an individual asset to an individual user, ignoring macroeconomic spillovers. We estimate the contribution of a natural asset to aggregate economic activity by exploiting exogenous variation in the quality of surfing waves around the world, using a global dataset covering over 5,000 locations. Treating night-time light emissions as a proxy for economic activity we find that high quality surfing waves boost activity in the local area (<5km), relative to comparable locations with low quality waves, by 0.15-0.28 log points from 1992-2013. This amounts to between US$ 18-22 million (2011 PPP) per wave per year, or $50 billion globally. The effect is most pronounced in emerging economies. Surfing helps reduce extreme rural poverty, by encouraging people to nearby towns. When a wave is discovered by the international community, economic growth in the area rises by around 3%.

Left in the Dark? Oil and Rural Poverty (2016) with Smith, B., OxCarre Working Paper No. 164, University of Oxford

Do oil booms reduce poverty and inequality? To study this we propose a new measure of rural poverty: counting people that live in darkness. We do this by combining high-resolution satellite data on night-time lights and population globally from 2000-2013. This measure accurately identifies 83% of households as being above or below the extreme poverty threshold when compared to over 600,000 surveys. We find that both high oil prices and new discoveries increase light intensity and GDP nationally, but promote inequality because the increases are limited to towns and cities with no evidence that they benefit the rural poor.

Optimal Monetary Responses to News of an Oil Discovery (2015) OxCarre Working Paper No. 121, University of Oxford

This paper studies how monetary policy should optimally respond to an oil discovery. Oil discoveries provide news that the natural level of output will increase in the future. Anticipated increases in natural output lower the natural real interest rate. Optimal monetary policy must accommodate these changes, and is well-approximated by a Taylor rule that responds to the natural rate of interest. Failure to accommodate these changes, as in a peg or naive Taylor rule, can cause forward-looking inflation and a recession. To illustrate this I incorporate a government, oil and news into a standard DSGE model of a small open economy that permits an analytical solution for optimal policy. I then use the model to present a novel explanation for UK stagflation in the 1980s after North Sea Oil began production.

Seven Principles for Managing Resource Wealth (2015), OxCarre Working Paper No. 154, University of Oxford

This paper studies how capital-scarce countries should manage volatile resource income. Existing literature recommends that capital-scarce countries invest domestically, but that volatile resource income should be saved in a foreign sovereign wealth fund. I reconcile these by combining a stochastic model of precautionary savings with a deterministic model of a capital-scarce resource exporter. I show that capital-scarce countries should still establish a Volatility Fund, but it should be relatively smaller than in capital-abundant countries. The fund should be built before anticipated windfalls, partially invested domestically, and used as a source of income rather than a buffer against temporary shocks. To do so I develop a parsimonious framework that nests a variety of existing results as special cases, which are presented in seven principles. The first three apply to capital-abundant countries: i) Smooth consumption using a Future Generations Fund; ii) Build a Volatility Fund quickly, then leave it alone; and iii) Invest to stabilise the real exchange rate. The remaining four apply to capital-scarce countries: iv) Finance consumption and investment with oil; v) Use a temporary Parking Fund to improve absorption, vi) Invest part of the Volatility Fund domestically; and vii) Support private investment.

Integrating Financial and Demographic Longevity Risk Models: A Model for Financial Applications (2008) with Sherris, M., UNSW Working paper

  • Awarded Best Paper Prize at 18th International Actuarial Approach for Financial Risks (AFIR) Colloquium, Rome 2008