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The value of the exchange rate and the Dutch disease

Author

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  • Luiz Carlos Bresser-Pereira

Abstract

This paper revisits the original (2008) paper on the Dutch disease, which defined it by the existence of two exchange rate equilibriums (the current and the industrial exchange rate equilibriums). Its novelty is in claiming that, as we have a value and a market price for each good or service, we also have a value and a market price for foreign money. The value is the cost plus reasonable profit corresponding to the exchange rate that makes competitive the country’s competent business enterprises; the nominal exchange rates floats around the value according to the demand and supply of foreign money. This basic distinction of the exchange rate in terms of value and in terms of price allows us to understand that the two equilibriums are defined in value terms, and opens room for a clear distinction of the policies that affect the value from the ones that affect the market price of the exchange rate. JEL Classification: D46; F31.

Suggested Citation

  • Luiz Carlos Bresser-Pereira, 2013. "The value of the exchange rate and the Dutch disease," Brazilian Journal of Political Economy, Center of Political Economy, vol. 33(3), pages 371-387.
    • Handle: RePEc:ekm:repojs:v:33:y:2013:i:3:p:371-387:id:318
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    File URL: https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/318/309
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    Citations

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    Cited by:

    1. Spinola, Danilo, 2023. "Instability constraints and development traps: an empirical analysis of growth cycles and economic volatility in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    2. Barczikay, Tamás & Biedermann, Zsuzsánna & Szalai, László, 2020. "An investigation of a partial Dutch disease in Botswana," Resources Policy, Elsevier, vol. 67(C).
    3. Elena Tarpani & Cristina Piselli & Claudia Fabiani & Ilaria Pigliautile & Eelke J. Kingma & Benedetta Pioppi & Anna Laura Pisello, 2022. "Energy Communities Implementation in the European Union: Case Studies from Pioneer and Laggard Countries," Sustainability, MDPI, vol. 14(19), pages 1-17, October.
    4. Shahbaz, Muhammad & Destek, Mehmet Akif & Okumus, Ilyas & Sinha, Avik, 2019. "An empirical note on comparison between resource abundance and resource dependence in resource abundant countries," Resources Policy, Elsevier, vol. 60(C), pages 47-55.
    5. Niftiyev, Ibrahim, 2018. "De-Industrialization Patterns of Azerbaijan: Potential Outcomes of Dutch Disease Syndrome," EconStor Preprints 227733, ZBW - Leibniz Information Centre for Economics.
    6. Katarzyna Czech & Ibrahim Niftiyev, 2021. "The Impact of Oil Price Shocks on Oil-Dependent Countries’ Currencies: The Case of Azerbaijan and Kazakhstan," JRFM, MDPI, vol. 14(9), pages 1-14, September.
    7. Renée Fry-McKibbin & Rodrigo da Silva Souza, 2018. "Chinese resource demand or commodity price shocks: Macroeconomic effects for an emerging market economy," CAMA Working Papers 2018-45, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    8. Niass, Dieynaba, 2022. "Does Natural Resources Endowment Affect Export Diversification In Africa? A Cross-Country Analysis," Conference papers 333416, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Niftiyev, Ibrahim, 2020. "The De-industrialization Process In Azerbaijan: Dutch Disease Syndrome Revisited," EconStor Conference Papers 227485, ZBW - Leibniz Information Centre for Economics.

    More about this item

    Keywords

    Dutch disease; exchange rate; value; market price;
    All these keywords.

    JEL classification:

    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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