International Economics: IB Economics

Another impact of the war in Ukraine could be a further shift of economic gravity East, with Russia seeking closer ties with China. This Reality Check article looks at the extent to which the two already trade and whether there's scope for the expansion of this. 

Of course, the reality is that one of the two is increasingly an economic irrelevance, and only of any real economic significance because of its natural resources. The other is China. Might we be talking about the world's largest, and longest-lasting example of Dutch Disease in a few years?

A big boost for the Cypriot economy, with the news that ExxonMobil has discovered large natural gas deposits. You should be able to think of the possible benefits of this for the supply-side and, by definition, LRAS.

However, the experience of some economies is that natural resources are a curse, not a blessing. In LICs we talk of the 'resource curse', in HICs we talk of 'Dutch disease' - you might think about what this means and why it happens. And then you might reflect upon whether the discovery of natural gas is going to be as beneficial as it might first appear.

Hint: you might think about what's likely to happen to the value of the 'Cypriot' currency in response to this news. But what is the currency of Cyprus? And what are its major industries?

I didn't spot this first time around: however, it merits closer inspection. Will the discovery and exploitation of oil spark development in Cambodia? 

Hmmm. Intuitively, you would think this would be a good thing. However, there's a lot of debate about this, with Paul Collier suggesting that the resource curse is one of four factors that contributes to a nation being part of the "Bottom Billion". 

Equally, other nations have experienced so-called "Dutch Disease", where the exploitation of a natural resource has caused their currencies to appreciate, and in some cases it has damaged the competitiveness of their exporters, and hastened deindustrialisation in some sectors.

So, a mixed bag: it will be worth watching the Cambodian economy going forward.