What is meant by Dutch disease?
Dutch disease is a shorthand way of describing the paradox which occurs when good news, such as the discovery of large oil reserves, harms a country’s broader economy. It may begin with a large influx of foreign cash to exploit a newfound resource.
Why does Dutch disease occur?
Although Dutch disease is generally associated with a natural resource discovery, it can occur from any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment.
Who came up with the Dutch disease?
The classic economic model describing Dutch disease was developed by the economists W. Max Corden and J. Peter Neary in 1982. In the model, there is a non-tradable sector (which includes services) and two tradable sectors: the booming sector, and the lagging (or non-booming) tradable sector.
Is Dutch disease same as resource curse?
This view now stands challenged by a number of studies that demonstrate the existence of a “resource curse” – slower growth and poorer economic performance in natural resource rich countries. The traditional explanation for the resource curse is the Dutch Disease or “deindustrialization”.
What is the definition of the Dutch disease?
What is Dutch Disease? Dutch disease is a concept that describes an economic phenomenon where the rapid development of one sector of the economy (particularly natural resources) precipitates a decline in other sectors. It is also often characterized by substantial appreciation of the domestic currency
How is monetary policy related to Dutch disease?
Monetary Policy Monetary policy is an economic policy that manages the size and growth rate of the money supply in an economy. It is a powerful tool to . Dutch disease is a paradoxical situation where good news for one sector of the economy, such as the discovery of natural resources, results in a negative impact on the country’s overall economy.
When did the Dutch disease hit Great Britain?
Examples of Dutch Disease In the 1970s, Dutch Disease hit Great Britain when the price of oil quadrupled, making it economically viable to drill for North Sea Oil off the coast of Scotland.
How is the Dutch disease a paradoxical situation?
Dutch disease is a paradoxical situation where good news for one sector of the economy, such as the discovery of natural resources, results in a negative impact on the country’s overall economy.
