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Demystifying Dutch Disease

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  • Naoko C. Kojo

    (World Bank Group, USA)

Abstract

This paper examines the theory of Dutch disease and its implications for practical policy questions. Dutch disease is a term that is well-known to economists and development practitioners. But it is also a concept that is often conflated with "resource curse" and misinterpreted as a "disease" that necessarily causes adverse impacts on the economy. The paper points out that many of the seemingly well-established arguments in this field are not necessarily grounded in theory or empirical evidence. Great care is needed in diagnosing Dutch disease and formulating policy prescriptions based on the theoretical framework, given the restrictive assumptions that may not be fully applicable and the limited relevance to today's inextricably intertwined trade flows.

Suggested Citation

  • Naoko C. Kojo, 2015. "Demystifying Dutch Disease," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-23.
  • Handle: RePEc:wsi:jicepx:v:06:y:2015:i:02:n:s1793993315500106
    DOI: 10.1142/S1793993315500106
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    2. Mahadeo, Scott M.R. & Heinlein, Reinhold & Legrenzi, Gabriella D., 2019. "Energy contagion analysis: A new perspective with application to a small petroleum economy," Energy Economics, Elsevier, vol. 80(C), pages 890-903.
    3. Zhuqing Liu & Jiadong Tong, 2023. "Housing Boom, Dutch Disease, and the Decline in China's Manufacturing Exports," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(3), pages 205-229, May.
    4. Irandoust, Manuchehr, 2022. "FDI and Natural Resource Rents: Evidence from Eight Post-Communist Countries," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(2), pages 67-79, June.

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    More about this item

    Keywords

    Dutch disease; natural resources; international capital flows; remittances; aid; Q33; F14; F11;
    All these keywords.

    JEL classification:

    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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