IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Dealing with Dutch Disease

  • Milan Brahmbhatt
  • Otaviano Canuto
  • Ekaterina Vostroknutova

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.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The World Bank in its series World Bank Other Operational Studies with number 10174.

in new window

Date of creation: Jun 2010
Date of revision:
Handle: RePEc:wbk:wboper:10174
Contact details of provider: Postal:
1818 H Street, N.W., Washington, DC 20433

Phone: (202) 477-1234
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Philippe Aghion & Philippe Bacchetta & Romain Rancière & Kenneth Rogoff, 2009. "Exchange rate volatility and productivity growth: The role of financial development," Post-Print halshs-00754377, HAL.
  2. Xavier Sala-i-Martin & Arvind Subramanian, 2003. "Addressing the Natural Resource Curse: An Illustration from Nigeria," NBER Working Papers 9804, National Bureau of Economic Research, Inc.
  3. David S. Jacks, Kevin H. O'Rourke and Jeffrey G. Williamson, 2009. "Commodity Price Volatility and World Market Integration since 1700," The Institute for International Integration Studies Discussion Paper Series iiisdp284, IIIS.
  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-78, May.
  5. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  6. Kareem Ismail, 2010. "The Structural Manifestation of the ‘Dutch Disease’; The Case of Oil Exporting Countries," IMF Working Papers 10/103, International Monetary Fund.
  7. Mehlum, Halvor & Moene, Karl-Ove & Torvik, Ragnar, 2003. "Institutions and the resource curse," Memorandum 29/2002, Oslo University, Department of Economics.
  8. Norman V. Loayza & Romain Rancière & Luis Servén & Jaume Ventura, 2007. "Macroeconomic Volatility and Welfare in Developing Countries: an Introduction," Post-Print halshs-00754201, HAL.
  9. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  10. repec:idb:brikps:59538 is not listed on IDEAS
  11. Luis Servén, 2003. "ERRATUM: Real-Exchange-Rate Uncertainty and Private Investment in LDCs," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 492-492, May.
  12. 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.
  13. Robinson, James A & Torvik, Ragnar & Verdier, Thierry, 2002. "Political Foundations of the Resource Curse," CEPR Discussion Papers 3422, C.E.P.R. Discussion Papers.
  14. Alvaro Aguirre & César Calderón, 2005. "Real Exchange Rate Misalignments and Economic Performance," Working Papers Central Bank of Chile 316, Central Bank of Chile.
  15. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," CSAE Working Paper Series 2007-15, Centre for the Study of African Economies, University of Oxford.
  16. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  17. Spatafora, Nikola & Warner, Andrew, 1995. "Macroeconomic effects of terms-of-trade shocks : the case of oil-exporting countries," Policy Research Working Paper Series 1410, The World Bank.
  18. 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 825-48, December.
  19. Anthony J. Venables & William Maloney & Ari Kokko & Claudio Bravo Ortega & Daniel Lederman & Roberto Rigobón & José De Gregorio & Jesse Czelusta & Shamila A. Jayasuriya & Magnus Blomström & L. Colin X, 2007. "Natural Resources: Neither Curse nor Destiny," IDB Publications (Books), Inter-American Development Bank, number 59538 edited by William Maloney & Daniel Lederman.
  20. Luis Servén, 2003. "Real-Exchange-Rate Uncertainty and Private Investment in LDCS," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 212-218, February.
  21. Steven A Barnett & Rolando Ossowski, 2002. "Operational Aspects of Fiscal Policy in Oil-Producing Countries," IMF Working Papers 02/177, International Monetary Fund.
  22. 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.
  23. Giavazzi, Francesco & Sheen, Jeff R & Wyplosz, Charles, 1988. "The Real Exchange Rate and the Fiscal Aspects of a Natural Resource Discovery," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 427-50, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wboper:10174. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Breineder)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.