Neutralizing the Dutch disease

Resumo

This paper discusses the political economy involved in the required neutralization of the Dutch disease – a long-term overvaluation of a national currency originated in exports of commodities that generate Ricardian rents or benefit from commodity booms. The difficulty in dealing with this market failure is associated to two political problems: the natural resource curse, which is the generalized rent-seeking that often takes over a commodity-exporting country, and exchange rate populism, the practice of keeping the currency overvalued, to ensure the reelection of politicians. While the two political problems have cultural and institutional roots that make them resilient to change, this paper shows that there is a relatively simple policy that will effectively turn the currency competitive and the manufacturing industry, a possibility.

Ficha do documento

Tipo

Estudo

Ano

2018

Instituição

Escola de Economia de São Paulo

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso aberto

Identificador

oai:repositorio.fgv.br:10438/23921

Temas

Economia

Palavras-chave

Dutch diseaseNatural resource curseExchange rate populismNew developmentalismEconomiaPolítica econômicaPolítica monetária