Brahmbhatt, MilanCanuto, OtavianoVostroknutova, Ekaterina2012-08-132012-08-132010-06https://hdl.handle.net/10986/10174This note looks at so-called Dutch disease, a phenomenon reflecting changes in the structure of production in the wake of a favorable shock (such as a large natural resource discovery, a rise in the international price of an exportable commodity, or the presence of sustained aid or capital inflows). Where the natural resources discovered are oil or minerals, a contraction or stagnation of manufacturing and agriculture could accompany the positive effects of the shock, according to the theory. The note considers channels through which such natural resource wealth can affect the economy. It also focuses on the development implications of Dutch disease, particularly the potential negative effects related to productivity dynamics and volatility; and concludes with a summary of possible policy responses, including the mix of fiscal, exchange rate, and structural reform policies.CC BY 3.0 IGOABUNDANCEADVERSE EFFECTSADVERSE IMPACTAGGREGATE DEMANDAGRICULTUREAMERICAN ECONOMIC REVIEWBALANCE-OF-PAYMENTS CRISESBENCHMARKBUSINESS CLIMATEBUSINESS REGULATIONSCAPITA GROWTHCAPITAL FLOWSCAPITAL INFLOWSCAPITAL INTENSITYCENTRAL BANKCIVIL WARCOLLATERALCOMMODITIESCOMMODITYCOMMODITY PRICECOMMODITY PRICESCOMPARATIVE ADVANTAGECOMPETITIVENESSCONSUMER PRICECONSUMER PRICE INDEXDEBTDEBT LEVELSDEBT OVERHANGDEMOCRACYDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPING ECONOMIESDEVELOPMENT ECONOMICSDEVELOPMENT STRATEGYDISINFLATIONDOMESTIC ECONOMYECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC INTERDEPENDENCEECONOMIC PERFORMANCEECONOMIC RESEARCHECONOMIC THEORYECONOMIC VOLATILITYELASTICITYEXCHANGE RATEEXCHANGE RATESEXPENDITUREEXPENDITURESEXPORT COMPETITIVENESSEXPORT GROWTHEXPORTERSEXPORTSEXTERNAL DEBTEXTERNALITIESFEDERAL RESERVEFEDERAL RESERVE BANKFINANCIAL ASSETSFINANCIAL DEVELOPMENTFISCAL DISCIPLINEFISCAL POLICYFISCAL RULEFISCAL RULESFLEXIBLE EXCHANGE RATESFOREIGN CAPITALFOREIGN DIRECT INVESTMENTFUTURE GROWTHGDPGLOBALIZATIONGOVERNMENT SPENDINGGROWTH POTENTIALINCOMEINCOME GROUPINCOME LEVELSINCOMESINCREASING RETURNSINCREASING RETURNS TO SCALEINFLATION TARGETINGINFLOWS OF CAPITALINSTITUTIONAL WEAKNESSESINSTRUMENTINTERNATIONAL MONETARY FUNDINVESTINGINVESTMENT FUNDINVESTMENT PROJECTSLDCSLIBERALIZATIONLOW- INCOME COUNTRIESLOW-INCOME ECONOMIESMACROECONOMIC MANAGEMENTMACROECONOMIC POLICIESMACROECONOMIC VOLATILITYMACROECONOMICSMISMANAGEMENTMONETARY ECONOMICSMONETARY FUNDMONETARY POLICYNATIONAL INCOMENATURAL RESOURCENATURAL RESOURCESNEGATIVE IMPACT ON GROWTHNET EXPORTSOIL PRICEOPEN ECONOMYOUTPUTOVERVALUATIONPERMANENT INCOMEPOLICY RESPONSEPOLICY RESPONSESPOSITIVE EFFECTSPRICE VOLATILITYPRIVATE CAPITALPRIVATE INVESTMENTPRODUCTIVITYPRODUCTIVITY GROWTHPUBLIC CONSUMPTIONPUBLIC ECONOMICSPUBLIC GOODSPUBLIC SECTORPUBLIC SPENDINGREAL EFFECTIVE EXCHANGE RATEREAL EXCHANGE RATEREAL EXCHANGE RATESREAL-EXCHANGE-RATE UNCERTAINTYRED TAPERENT SEEKINGREVIEW OF ECONOMICSSAVINGSSTAGNATIONTAXTRADE LIBERALIZATIONTRADE SHOCKSUNEMPLOYMENTVALUE ADDEDVOLATILITYWAGESWEALTHWORLD MARKETWORLD MARKET INTEGRATIONWorld Bank10.1596/10174