Real and monetary aspects of the Dutch disease

  • 4.42 MB
  • English
StatementJ. Peter Neary.
ID Numbers
Open LibraryOL19902441M

Neary J.P. () Real and Monetary Aspects of the ‘Dutch Disease’. In: Jungenfelt K., Hague D. (eds) Structural Adjustment in Developed Open Economies.

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International Economic Association by: J. Peter Neary, "Real and monetary aspects of the 'Dutch disease'," Working PapersSchool of Economics, University College : RePEc:ucn Cited by: Real and monetary aspects of the 'Dutch disease' Files in This Item: File Description Size Format ; wp82_pdf: kB: Adobe PDF: TZ: Abstract: This paper presents a theoretical analysis of some of the issues raised by the "Dutch Disease": the phenomenon whereby a boom in one traded goods sector squeezes profitability.

Dutch disease is a concept that describes an economic phenomenon where the rapid development of one sector of the economy (particularly natural resources) precipitates a decline in other sectors. It is also often characterized by substantial appreciation of the domestic currency Monetary Policy Monetary policy is an economic policy that manages.

The classic economic model describing Dutch disease was developed by the economists W. Max Corden and J. Peter Neary in In the model, there is a non-tradable sector (which includes services) and two tradable sectors: the booming sector, and the lagging (or non-booming) tradable booming sector is usually the extraction of natural resources such as oil, natural gas, gold, copper.

In the case of flexible prices and wages (baseline model), monetary policy plays no role. Simulation results are shown in Fig.

1, Fig. 2 which present the reallocation process experienced in the economy in response to an increase of one standard deviation of oil price and oil resources. Fig. 1 shows that an increase in the international price of oil leads to a decline in the manufacturing. From the empirical perspective, the Dutch Disease hypothesis has been intensively examined in a variety of aspects containing the effect of resource booms on a real currency appreciation.

Edwards (), for instance, verified the causality from a commodity export boom to a real exchange rate through money‐inflation link. How to Prevent Dutch Disease.

Limit the rise in the real exchange rate. For example, China limited its real exchange rate by purchasing US bonds to keep the value of the relatively Yuan lower. Reduce foreign capital flows. If a country moved from a budget deficit to a budget surplus, it would attract less foreign investment to purchase the.

the Dutch disease aspect of migrant remittances to Pakistan using Bayesian analytical methods. Though the use of probabilistic approach is increasing in economic studies, particularly those dealing with macro and financial economics,1 this is to the best of our knowledge, the first application of the technique in a study of Dutch disease effects.

Dutch disease is an economic term for the negative consequences that can follow a spike in the value of a nation’s currency. It is primarily associated with the repercussions of a natural.

Azerbaijan's economy, drunk on oil, is suffering rapid - inflation, The Economist, “Diagnosing Dutch disease: Does Russia have the symptoms?”, Oomes N., Kalcheva K.

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() International Monetary Fund“Dutch disease and Azerbaijan economy”, Hasanov F., Econimics Education and Resource Consortium, Baku, DOUBLE. Dutch Disease effects are noted, and may be considerable.

This is “exchange rate protection”. Gains to some industries are likely to be balanced by losses to others. It is shown, surprisingly, that a fiscal surplus that is financed by taxation of the profits of the Booming Sector may not significantly moderate real.

The Dutch Disease Effect showing the Cumulative Impact over 4 years of Kalman and H-P Filtered Permanent Oil Price Shocks: Using Eqn (14) 31 5. The Dutch Disease and Capital Market Openness to FDI by Country: Using Eqn (15)32 6.

Description Real and monetary aspects of the Dutch disease EPUB

The Dutch Disease in Countries with Open and less Open Capital markets (Proposi. Search the world's most comprehensive index of full-text books. My library. Downloadable. In this paper, we compare, first, the impact of a windfall and a boom sectors on the economy of an oil exporting country and their welfare implications ; in a second step, we analyze how monetary policy should be conducted to insulate the economy from the main impact of these shocks, namely the Dutch Disease.

To do so, we built a Multisector DSGE model with nominal and real. Provided by the author(s) and University College Dublin Library in accordance with publisher policies.

Please cite the published version when available. Aid and the Dutch disease: Macroeconomic management when everybody loves you In particular, abundant foreign exchange loans can force an appreciation of the real exchange rate (often through domestic inflation rather than a nominal appreciation).

In addition, since the government is almost always the recipient of these loans, it can crowd. Dutch Disease The phenomenon in which the manufacturing sector of a country declines when it begins to make significant profits from the exploitation of a natural resource.

For example, if a country suddenly discovers oil and sells it on the international market, it may see a decline in the competitiveness of its manufacturing companies. It is thought. This syndrome has come to be known as "Dutch disease." Although the disease is generally associated with a natural resource discovery, it can occur from any development that results in a large inflow of foreign currency, including a sharp surge in natural resource.

The detail of the Dutch Disease is explained in chapter 2. What has been said about the Dutch disease in line with economics will be mentioned in chapter 3 referring to economic theories and the models established by Corden and Neary. The econometric model to be analyzed is discussed in the chapter 4.

Chapter 5 explains specific details. Concerns about Dutch disease may also derive from the view that real exchange rate overvaluation lowers growth, a result that appears to be supported by the empirical evidence.

Evidence on the positive effects that an undervalued real exchange rate may exert growth is mixed, with some studies suggesting that undervaluation actually hurts growth. This paper investigates Dutch Disease hypothesis analyzing the impact of foreign inflows on appreciating real exchange rate.

The paper also studies contraction in the tradable sector in selected. outcome of standard Dutch disease models, even though in this paper it will emerge through financial and monetary mechanisms rather than real-side ones.

Second, and perhaps more relevantly, the above economic spiral may be abruptly reverted should economic agents evaluate the accumulation of foreign debt and the exchange rate appreciation to be.

The Dutch Disease refers to a situation in which I: manufacturing firms contract when resource-sector firms expand. II: the international value of the domestic currency is rising.

Neither I nor II is true. II is true; I is not. Both I and II are true. I is true; II is not. Assume that nobody cares about the economic well-being of future. Books at Amazon. The Books homepage helps you explore Earth's Biggest Bookstore without ever leaving the comfort of your couch.

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economic and monetary aspects of the phenomenon in combination with the phrase Dutch disease, in more popular publications, media and politics, all the different aspects are usually grouped together while loosely naming the phenomena either resource or oil curse or Dutch disease. It is the loose usage of terminology that has.

The essential nature of the aid-induced Dutch Disease derives from the observation that while the growth and diversification of exports play a central role in the transformation of poor countries, the mechanics of aid absorption may generate a negative feedback from aid to export competitiveness and growth, thereby acting as a brake on development (Bevan ).

The Dutch Disease in the Context of Ghana's Oil and Gas Find: The Plausible Economic Effects on the Ghanaian Economy Article (PDF Available) in Indian Growth and Development Review 9(2) sector. However, evidence suggests that Dutch Disease can be caused by poor management in other sectors of industry as well.

In this paper, I analyze different publications about Dutch Disease. The analysis shows the possible causes and consequences of Dutch Disease and the ways to deal with it.

dutch disease: The deindustrialization of a nation's economy that occurs when the discovery of a natural resource raises the value of that nation's currency, making manufactured goods less competitive with other nations, increasing imports and decreasing exports.

The term originated in Holland after the discovery of North Sea gas.My years of research in Dutch archives while working on a book, Tulipmania: Money, Honor and Knowledge in the Dutch Golden Age, told me a different story. It was just as illuminating, but it was.The Dutch disease syndrome in the periphery of the Eurozone Figures 4b and 5 show that countries in the periphery experienced a credit boom due to lower real interest rates.

As a result of this credit boom, they experienced current account deficits.