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Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 05 de 2013


The Dutch Disease in the Portuguese Economy

João Sousa Andrade

Faculdade de Economia, Universidade de Coimbra e GEMF

António Portugal Duarte

Faculdade de Economia, Universidade de Coimbra e GEMF

The Portuguese economy has benefited from large amounts of European structural funds since the mid-eighties. At the same time, interest rates have decreased substantially, mainly due to a credibility phenomenon. The effects of those funds and the reduction of financial costs can be considered as analogous to the phenomenon known as Dutch Disease. That is to say, the inflow of financial transfers is also considered a curse. In order to eliminate this curse we must take into account the two effects associated with Dutch Disease: the resources effect and the demand effect. Portuguese public policies have not been appropriate and have not prevented the real exchange rate appreciation, contributing to a disaster in terms of GDP growth. After a descriptive analysis of some variables, we estimate a set of equations that take account of the direct and indirect effects of structural funds and financial costs on the economy where the effects on the real exchange rate play the major role.

JEL Classification: C01; E23; F43; H63; J31.

External Aid; Co-integration; Financial Costs; Dutch Disease; Dynamic Models; Public Policies.

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