1.1 Purpose and Scope of the Study

Developing countries are prone to periodic temporary external shocks. Effects of these shocks can be both positive and negative. These can come through a sudden change in the current and capital accounts of the balance of payments or can originate from internal sources. A positive external shock, in the form of a resources boom, enables an economy to attain higher levels of growth, consumption and welfare in the short run through the increased inflow of capital or export revenues. However, a positive shock can be a mixed blessing for a country, because the economic changes triggered by a resources boom will enhance long-term growth prospects only if the government takes appropriate policy measures. ...

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