Dealing with Dutch Disease

Brahmbhatt, Milan; Canuto, Otaviano; Vostroknutova, Ekaterina

Dealing with Dutch Disease

Autores

Brahmbhatt, Milan

Canuto, Otaviano

Vostroknutova, Ekaterina

Editor

World Bank, Washington, DC

Descripción

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.

Palabras clave

ABUNDANCE, ADVERSE EFFECTS, ADVERSE IMPACT, AGGREGATE DEMAND, AGRICULTURE, AMERICAN ECONOMIC REVIEW, BALANCE-OF-PAYMENTS CRISES, BENCHMARK, BUSINESS CLIMATE, BUSINESS REGULATIONS, CAPITA GROWTH, CAPITAL FLOWS, CAPITAL INFLOWS, CAPITAL INTENSITY, CENTRAL BANK, CIVIL WAR, COLLATERAL, COMMODITIES, COMMODITY, COMMODITY PRICE, COMMODITY PRICES, COMPARATIVE ADVANTAGE, COMPETITIVENESS, CONSUMER PRICE, CONSUMER PRICE INDEX, DEBT, DEBT LEVELS, DEBT OVERHANG, DEMOCRACY, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DEVELOPMENT ECONOMICS, DEVELOPMENT STRATEGY, DISINFLATION, DOMESTIC ECONOMY, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC INTERDEPENDENCE, ECONOMIC PERFORMANCE, ECONOMIC RESEARCH, ECONOMIC THEORY, ECONOMIC VOLATILITY, ELASTICITY, EXCHANGE RATE, EXCHANGE RATES, EXPENDITURE, EXPENDITURES, EXPORT COMPETITIVENESS, EXPORT GROWTH, EXPORTERS, EXPORTS, EXTERNAL DEBT, EXTERNALITIES, FEDERAL RESERVE, FEDERAL RESERVE BANK, FINANCIAL ASSETS, FINANCIAL DEVELOPMENT, FISCAL DISCIPLINE, FISCAL POLICY, FISCAL RULE, FISCAL RULES, FLEXIBLE EXCHANGE RATES, FOREIGN CAPITAL, FOREIGN DIRECT INVESTMENT, FUTURE GROWTH, GDP, GLOBALIZATION, GOVERNMENT SPENDING, GROWTH POTENTIAL, INCOME, INCOME GROUP, INCOME LEVELS, INCOMES, INCREASING RETURNS, INCREASING RETURNS TO SCALE, INFLATION TARGETING, INFLOWS OF CAPITAL, INSTITUTIONAL WEAKNESSES, INSTRUMENT, INTERNATIONAL MONETARY FUND, INVESTING, INVESTMENT FUND, INVESTMENT PROJECTS, LDCS, LIBERALIZATION, LOW- INCOME COUNTRIES, LOW-INCOME ECONOMIES, MACROECONOMIC MANAGEMENT, MACROECONOMIC POLICIES, MACROECONOMIC VOLATILITY, MACROECONOMICS, MISMANAGEMENT, MONETARY ECONOMICS, MONETARY FUND, MONETARY POLICY, NATIONAL INCOME, NATURAL RESOURCE, NATURAL RESOURCES, NEGATIVE IMPACT ON GROWTH, NET EXPORTS, OIL PRICE, OPEN ECONOMY, OUTPUT, OVERVALUATION, PERMANENT INCOME, POLICY RESPONSE, POLICY RESPONSES, POSITIVE EFFECTS, PRICE VOLATILITY, PRIVATE CAPITAL, PRIVATE INVESTMENT, PRODUCTIVITY, PRODUCTIVITY GROWTH, PUBLIC CONSUMPTION, PUBLIC ECONOMICS, PUBLIC GOODS, PUBLIC SECTOR, PUBLIC SPENDING, REAL EFFECTIVE EXCHANGE RATE, REAL EXCHANGE RATE, REAL EXCHANGE RATES, REAL-EXCHANGE-RATE UNCERTAINTY, RED TAPE, RENT SEEKING, REVIEW OF ECONOMICS, SAVINGS, STAGNATION, TAX, TRADE LIBERALIZATION, TRADE SHOCKS, UNEMPLOYMENT, VALUE ADDED, VOLATILITY, WAGES, WEALTH, WORLD MARKET, WORLD MARKET INTEGRATION