Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324056 
Year of Publication: 
2021
Citation: 
[Journal:] PSL Quarterly Review [ISSN:] 2037-3643 [Volume:] 74 [Issue:] 299 [Year:] 2021 [Pages:] 307-323
Publisher: 
Associazione Economia civile, Rome
Abstract: 
Commodity booms are usually associated with commodity-exporting countries suffering from real exchange rate appreciation and negative economic consequences, that is, Dutch disease. Yet, there are different ways to manage or not manage the commodity rent earned via exports. Based on a monetary theory of exchange rates and a heterogenous sample of countries, this analysis shows that Dutch disease during commodity booms is not an inevitable outcome. Different macroeconomic characteristics of countries give way to different outcomes. In particular, richer countries, countries with trade surplus as well as those with a history of low inflation are better equipped to avoid real appreciation. Evidence unambiguously shows that countries with real appreciation experience structural change away from manufacturing toward less productive sectors such as construction. Macroeconomic dynamics and political economy factors make it more difficult for developing countries to make long-term use of the rent gained during commodity booms.
Subjects: 
commodity booms
Dutch disease
structural change
economic policy
JEL: 
E42
F14
F43
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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