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Title:Fiscal policy and Dutch disease PDF Logo
Authors:van der Ploeg, Frederick
Issue Date:2011
Series/Report no.:CESifo working paper: Resource and Environment Economics 3398
Abstract:In this paper we revisit the Dutch disease paying particular attention to the role of specific factors of production and capital stock dynamics. The main insight is that if the natural resource rich windfall is substantial but not large enough for the country to become a rentier, capital goods must be produced at home and adjustment to natural resource windfall takes time. It takes time to build this home-grown capital. Specific factors are crucial to explain the dynamic responses of the real exchange rate, capital intensities and wages in response to a natural resource windfall. If a country is small and the windfall is large, it may be able to import capital and migrant labour in which case the Dutch disease can be avoided.
Subjects:specific factors
real exchange rate
capital stock dynamics
factor intensity
international trade
Dutch disease
permanent income
fiscal policy rules
overlapping generations
JEL:E01
F43
O41
Q30
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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