5 Determinants of Sectoral Output, Savings and Investment in Papua New Guinea

5.1 Introduction

The previous chapter examined the determinants of the real exchange rate and identified the major sources of real exchange rate movements in the PNG economy. The major changes in key macroeconomic variables, including changes in the RER and changes in aggregate demand and domestic policy variables all greatly influence the structure of an economy. This chapter focuses on the impact of the real exchange rate and domestic policy decisions on savings and investment behaviour and sectoral output growth in PNG, in order to examine the theoretical propositions of the ‘theory of booming sector’ discussed in Chapter 2.

A resources boom, can be a mixed blessing ...

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