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Oil Stock Discovery and Dutch Disease

Author

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  • John Hartwick

    () (Queen's University)

  • Kirk Hamilton

Abstract

We set out a model of a two-good, small open economy exporting a traditional exportable in order to finance capital goods rental payments. We observe that the traditional export sector declines with an exogenous increase in the country's oil export earnings, while the local goods sector expands. For input price effects to emerge, land is needed as a third input. For the "large land" case, we can have imports of capital steadily decline as oil earnings expand. Earnings from oil sales are stationary under our annuitization construction.

Suggested Citation

  • John Hartwick & Kirk Hamilton, 2009. "Oil Stock Discovery and Dutch Disease," Working Papers 1220, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1220
    as

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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1220.pdf
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    References listed on IDEAS

    as
    1. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
    2. repec:spr:portec:v:3:y:2004:i:2:d:10.1007_s10258-004-0035-x is not listed on IDEAS
    3. Budina, Nina & Pang, Gaobo & van Wijnbergen, Sweder, 2007. "Nigeria's growth record : Dutch disease or debt overhang ?," Policy Research Working Paper Series 4256, The World Bank.
    4. Ryuhei Okumura & Dapeng Cai, 2007. "Sustainable Constant Consumption In A Semi-Open Economy With Exhaustible Resources," The Japanese Economic Review, Japanese Economic Association, vol. 58(2), pages 226-237.
    5. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    6. Sweder van Wijnbergen, 1984. "Inflation, Employment, and the Dutch Disease in Oil-Exporting Countries: A Short-Run Disequilibrium Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 99(2), pages 233-250.
    7. Hartwick, John M, 1995. "Constant Consumption Paths in Open Eocnomies with Exhaustible Resources," Review of International Economics, Wiley Blackwell, vol. 3(3), pages 275-283, October.
    8. J. O. Olusi & M. A. Olagunju, 2005. "The Primary Sectors of the Economy and the Dutch Disease in Nigeria," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(2), pages 159-175.
    9. Vincent, Jeffrey R. & Panayotou, Theodore & Hartwick, John M., 1997. "Resource Depletion and Sustainability in Small Open Economies," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 274-286, July.
    10. Geir B. Asheim, 1986. "Hartwick's Rule in Open Economies," Canadian Journal of Economics, Canadian Economics Association, vol. 19(3), pages 395-402, August.
    11. Neary, J Peter & Purvis, Douglas D, 1982. " Sectoral Shocks in a Dependent Economy: Long-run Adjustment and Short-run Accommodation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 84(2), pages 229-253.
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    Cited by:

    1. Jean-Pierre Allegret & Cécile Couharde & Valérie Mignon & Tovonony Razafindrabe, 2017. "Oil currencies in the face of oil shocks: what can be learned from time-varying specifications?," Applied Economics, Taylor & Francis Journals, vol. 49(18), pages 1774-1793, April.
    2. van der Ploeg, Frederick & Venables, Anthony J., 2013. "Absorbing a windfall of foreign exchange: Dutch disease dynamics," Journal of Development Economics, Elsevier, vol. 103(C), pages 229-243.
    3. Carolina Gómez Cuenca, 2015. "Más Allá de un Boom de Recursos Naturales: Efectos de los Choques Petroleros en la Economía Colombiana," DOCUMENTOS CEDE 012565, UNIVERSIDAD DE LOS ANDES-CEDE.

    More about this item

    Keywords

    Dutch disease; resource discovery; invariant earnings;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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