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Testing the Hypothesis of Dutch Disease in the Bolivian Economy

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  • Cerezo Aguirre, Sergio

    (IISEC, Universidad Católica Boliviana)

Abstract

In recent years, Bolivia has experienced a strong inflow of foreign currency due in part to a sharp rise in prices of natural resources exports. This element along withthe real exchange rate appreciation has created concern about whether the economy is experiencing the so-called Dutch Disease (DD). Based on conditions described in Oomes and Kalcheva (2007) to detect this economic phenomenon (real appreciation, slower manufacturing sector growth, prompt growth of services and higher wages), this document finds no empirical evidence on this phenomenon. In particular, neither an overvalued exchange rate nor a persistent misalignment of the real exchange rate, nor a manufacturing de-industrialization is observed. The evolution of the services sector, their prices and real wages do not respond to the dynamics of a sector boom. However, the document considers that the presence of this phenomenon deserves close scrutiny. Instituto de Investigaciones Socio - Económicas; IISEC

Suggested Citation

  • Cerezo Aguirre, Sergio, 2014. "Testing the Hypothesis of Dutch Disease in the Bolivian Economy," Documentos de trabajo 3/2014, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
    • Handle: RePEc:ris:iisecd:2014_003
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    More about this item

    Keywords

    Dutch Disease; Macroeconomy; Instituto de Investigaciones Socio - Económicas; IISEC;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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