The macroeconomic implications of a resource discovery in an open economy.

Suggests that in a properly constructed macroeconomic model, a resource discovery does not pose special problems of macroeconomic management, eg. with the key addition of a time lag between the resource discovery and the spending of the resource revenue, a deflationary interval will follow the initial exchange rate appreciation. Policy responses to this are considered. Altering the rate of depletion has at least an indirect effect, and the initially appealing policy of slower resource depletion makes matters worse. Some form of expansionary policy is needed, without which the benefits conferred by the oil discovery will dissipate in increased unemployment.-V.S.Mead