The Dutch Disease Revisited: Theory and Evidence

Arsham Reisinezhad

PSE Working Papers from HAL

Abstract: Contrary to empirical evidence, the Dutch disease hypothesis, driven by Learning By Doing (LBD), does not predict the steady-state real exchange rate appreciation and economic growth deceleration due to a resource boom. To do so, I first represent a simple model to fill the theory's gap, and then adopt a dynamic panel data approach for a sample of 132 countries over the period 1970-2014 to re-evaluate both symptoms of the hypothesis in systematic analysis. The main findings are threefold. First, a resource boom appreciates the real exchange rate. Second, the real exchange rate appreciation decelerates the rate of growth in both sectors such that the shrinkage is larger in the manufacturing sector than in the service sector. This, in turn, makes the relative output level of the manufacturing sector to the service sector be smaller and economic growth be slower. Third, these effects are more intensive in resource-rich countries than in resource-poor countries.

Keywords: Natural resource; The Dutch Disease; Real exchange rate; Growth rate (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-opm
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03012647v1
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Citations: View citations in EconPapers (2)

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Working Paper: The Dutch Disease Revisited: Theory and Evidence (2020)
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