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The Dutch Disease in the Portuguese Economy

Author

Listed:
  • João Sousa Andrade

    (Faculty of Economics University of Coimbra and GEMF, Portugal)

  • António Portugal Duarte

    (Faculty of Economics University of Coimbra and GEMF, Portugal)

Abstract

The Portuguese economy has benefited from large amounts of European structural funds since the mid-eighties. At the same time, interest rates have decreased substantially, mainly due to a credibility phenomenon. The effects of those funds and the reduction of financial costs can be considered as analogous to the phenomenon known as Dutch Disease. That is to say, the inflow of financial transfers is also considered a curse. In order to eliminate this curse we must take into account the two effects associated with Dutch Disease: the resources effect and the demand effect. Portuguese public policies have not been appropriate and have not prevented the real exchange rate appreciation, contributing to a disaster in terms of GDP growth. After a descriptive analysis of some variables, we estimate a set of equations that take account of the direct and indirect effects of structural funds and financial costs on the economy where the effects on the real exchange rate play the major role.

Suggested Citation

  • João Sousa Andrade & António Portugal Duarte, 2013. "The Dutch Disease in the Portuguese Economy," GEMF Working Papers 2013-05, GEMF, Faculty of Economics, University of Coimbra.
    • Handle: RePEc:gmf:wpaper:2013-05.
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    More about this item

    Keywords

    External Aid; Co-integration; Financial Costs; Dutch Disease; Dynamic Models; Public Policies;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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