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Dealing with Dutch Disease

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  • Brahmbhatt, Milan

    ()
    (World Bank)

  • Canuto, Otaviano

    ()
    (World Bank)

  • Vostroknutova, Ekaterina

    ()
    (World Bank)

Abstract

This note looks at so-called Dutch disease, a phenomenon reflecting changes in the structure of production in the wake of a favorable shock (such as a large natural resource discovery, a rise in the international price of an exportable commodity, or the presence of sustained aid or capital inflows). Where the natural resources discovered are oil or minerals, a contraction or stagnation of manufacturing and agriculture could accompany the positive effects of the shock, according to the theory. The note considers channels through which such natural resource wealth can affect the economy. It also focuses on the development implications of Dutch disease, particularly the potential negative effects related to productivity dynamics and volatility; and concludes with a summary of possible policy responses, including the mix of fiscal, exchange rate, and structural reform policies.

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Bibliographic Info

Article provided by The World Bank in its journal Economic Premise.

Volume (Year): (2010)
Issue (Month): 16 (June)
Pages: 1-7

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Handle: RePEc:wbk:prmecp:ep16

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Related research

Keywords: Dutch disease; shock; natural resources; comodities; capital; aid; oil; minerals; manufacturing; agriculture; wealth; volatility;

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References

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  1. Frederick van der Ploeg & Steven Poelhekke, 2009. "Volatility and the natural resource curse," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 727-760, October.
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Citations

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Cited by:
  1. João Sousa Andrade & António Portugal Duarte, 2013. "The Dutch Disease in the Portuguese Economy," GEMF Working Papers 2013-05, GEMF - Faculdade de Economia, Universidade de Coimbra.
  2. van der Ploeg, Frederick & Venables, Anthony J., 2010. "Absorbing A Windfall of Foreign Exchange: Dutch disease dynamics," CEPR Discussion Papers 8086, C.E.P.R. Discussion Papers.
  3. van der Ploeg, Frederick, 2006. "Challenges and Opportunities for Resource Rich Economies," CEPR Discussion Papers 5688, C.E.P.R. Discussion Papers.
  4. Christos Nikas & Student Anastasia Blouchoutzi, 2014. "Emigrants’ Remittances and the “Dutch Disease” in Small Transition Economies: the Case Of Albania and Moldova," Romanian Statistical Review, Romanian Statistical Review, vol. 62(1), pages 45-65, March.
  5. Ogundipe, Adeyemi & Ogundipe, Oluwatomisin, 2013. "Oil Price and Exchange Rate Volatility in Nigeria," MPRA Paper 51668, University Library of Munich, Germany.
  6. Vincent Bodart & Bertrand Candelon & Jean-François Carpantier, 2013. "Real exchange rates, commodity prices and structural factors in developing countries," CREA Discussion Paper Series 13-09, Center for Research in Economic Analysis, University of Luxembourg.
  7. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
  8. Otaviano Canuto, 2010. "Toward a Switchover of Locomotives in the Global Economy," World Bank Other Operational Studies 10159, The World Bank.
  9. Lee Robinson & Alice Nicole Sindzingre, 2012. "China’s Ambiguous Impacts on Commodity-Dependent Countries: the Example of Sub-Saharan Africa (with a Focus on Zambia)," EconomiX Working Papers 2012-39, University of Paris West - Nanterre la Défense, EconomiX.
  10. Frederick van der Ploeg & Anthony J. Venables, 2012. "Natural Resource Wealth: The Challenge of Managing a Windfall," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 315-337, 07.
  11. Kablan, Sandrine & Loening, Josef, 2012. "Is Chad affected by Dutch or Nigerian disease?," MPRA Paper 39799, University Library of Munich, Germany, revised 02 Jul 2012.
  12. World Bank, 2012. "Lao PDR - Mapping the Gender Dimensions of Trade : A Preliminary Exposition," World Bank Other Operational Studies 11914, The World Bank.

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