What is Dutch disease in economics?

Published - October 20, 2017 02:15 am IST


This refers to the phenomenon wherein countries that are rich in natural resources witness uneven growth across sectors. According to the thesis, when resource-rich countries export their resources to the rest of the world, it causes the exchange rate of their currency to appreciate significantly; this, in turn, affects other sectors in the country by discouraging their exports while encouraging the import of cheaper alternatives. The term was coined by The Economist in 1977 to describe the decline of the manufacturing industry in the Netherlands. The idea, however, was first proposed by economists Peter Neary and Max Corden in a paper published in 1982.

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