Dutch Disease, Unemployment and Structural Change

Mariano Kulish, James Morley, Nadine Yamout and Francesco Zanetti

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We build a multi-sector, open economy model that captures the effects of a commodity boom on unemployment when there is also ongoing structural change. We use Bayesian methods to jointly estimate transition path effects of structural change and business cycle dynamics. Applying our model to the Australian economy, the estimates suggest that the large, permanent increase in commodity prices of the 2000s is critical for the observed appreciation of the real exchange rate and the contraction of net exports. Consistent with Dutch disease, the commodity boom increases unemployment in the short run. But structural change in the form of shifting preferences over non-tradable consumption and non-tradable employment, a process somewhat akin to structural transformation, explains the long-run reduction in unemployment, the increasing importance of the non-tradable sector for aggregate fluctuations and the increasing responsiveness of the tradable sector to shocks.

Keywords: Dutch disease; commodity prices; unemployment; structural change; structural transformation (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2023-08
New Economics Papers: this item is included in nep-dge and nep-opm
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Working Paper: Dutch Disease, Unemployment and Structural Change (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-38

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