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GEMF

Grupo de Estudos Monetários e Financeiros

Estudo do GEMF n.º 10/2016

   

Alternative Sources of Dutch Disease: A Survey of the Literature


Nuno Baetas da Silva, João Sousa Andrade & António Portugal Duarte
Faculdade de Economia da Universidade de Coimbra
Grupo de Estudos Monetários e Financeiros (GEMF)

Abstract:

This work reviews the literature on the alternative sources of Dutch Disease. We discuss the so-called Core Model of Dutch Disease, its limitations, extensions and the main contributions to the most recent theoretical and empirical methodologies of the Dutch Disease Economics applied to alternative capital inflows. By analyzing the effects associated with foreign aid, remittances, foreign direct investment and tourism on the real exchange rate and on the manufacturing sector, we set the stage both on the theoretical ground and on empirical evidence for a wider application of Dutch Disease classical approach. While the core model of Dutch Disease makes unambiguously predictions regarding the negative effects of a resource boom on the manufacturing sector, the empirical literature on the alternative sources of the disease that has followed has not clearly identified such effects.

Keywords: Dutch Disease, De-industrialization, Resource Boom and Capital Inflows.

JEL classification: F2, F41, O14, Q33

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