A fiscal vaccine against the Dutch disease

Rodrigo Caputo and Rodrigo Vald�s
Authors registered in the RePEc Author Service: Rodrigo Valdés

Applied Economics Letters, 2016, vol. 23, issue 1, 68-73

Abstract: The Dutch disease is a concern when a country is blessed with positive terms of trade (ToT) shocks. This article assesses the effects of a structural balance fiscal rule - which saves part of the revenues from better ToT - in limiting the real exchange rate (RER) appreciation. We find that the elasticity of the RER to ToT has declined (or is zero) in Chile and Norway, during the years in which the fiscal rule has been in place, although only for the part of ToT that accrue to government revenues.

Date: 2016
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DOI: 10.1080/13504851.2015.1049334

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