Sudden Influxes of Resource Wealth to the Economy
Dutch Disease is a condition in which a sudden increase of resource wealth from an extractive sector (such as oil, gas, coal, or mining) undermines other areas of the economy (such as agriculture, manufacturing, or tradeable services), shrinking them while spurring an appreciation in the real exchange rate. Although this may have some positive effects in the short run, Dutch Disease episodes can potentially lead to sectoral concentration and lower economic growth in the long run. This policy brief takes a systematic look at this macroeconomic phenomenon, collects evidence for 83 countries from 1998 to 2017, and summarizes policies that aim to prevent or mitigate Dutch Disease and some of its effects. A long-term perspective to prevent excessive dependence on natural resources and promote broad-based growth should include improvements in institutional governance of natural resource wealth, development of the financial sector to provide risk management products, and diversification of the economy through selective taxes and provision of public goods.
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| Format: | Brief biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020-04
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| Subjects: | DUTCH DISEASE, EXCHANGE RATE, COMMODITY PRICES, NATURAL RESOURCE WEALTH, DEBT, |
| Online Access: | http://documents.worldbank.org/curated/en/518791586875176017/Sudden-Influxes-of-Resource-Wealth-to-the-Economy-Avoiding-Dutch-Disease https://hdl.handle.net/10986/33614 |
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| Summary: | Dutch Disease is a condition in which a
sudden increase of resource wealth from an extractive sector
(such as oil, gas, coal, or mining) undermines other areas
of the economy (such as agriculture, manufacturing, or
tradeable services), shrinking them while spurring an
appreciation in the real exchange rate. Although this may
have some positive effects in the short run, Dutch Disease
episodes can potentially lead to sectoral concentration and
lower economic growth in the long run. This policy brief
takes a systematic look at this macroeconomic phenomenon,
collects evidence for 83 countries from 1998 to 2017, and
summarizes policies that aim to prevent or mitigate Dutch
Disease and some of its effects. A long-term perspective to
prevent excessive dependence on natural resources and
promote broad-based growth should include improvements in
institutional governance of natural resource wealth,
development of the financial sector to provide risk
management products, and diversification of the economy
through selective taxes and provision of public goods. |
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