Dutch Disease

Small island economies very often depend on external financial resources such as workers' remittances, international aid, bilateral aid from a patron country, or military spendings of a foreign country with special diplomatic and strategic agreements.
Such a rent may bring "dutch disease" types of effects on their economy, or may be viewed as a specialization of the economy in the export of  human capital (bringing remittances) or strategic services (bringing foreign aid).

ABSTRACT Workers' remittance is one of the major sources of foreign exchange earnings for Bangladesh in recent years. It accounted for 12% of GDP in 2009 and has colossal socio-economic implications for the country. However, the inflows of foreign exchange earnings can exert adverse effects on the international competitiveness of an economy as postulated by the Dutch Disease theory. Using Johansen cointegration and Vector Error Correction Model and annual data from 1971 to 2008, this paper investigates the effects of remittances on the external trade competitveness as measured by the movements of real exchange rate of the country. The results of the study suggest that the influx of workers' remittances significantly appreciates the real exchange rate and deteriorates the external trade competitiveness of Bangladesh. While increased terms of trade indicates similar adverse effects, openness in goods and capital markets and nominal devaluation improve the trade competitiveness of the country. Therefore, greater trade openness and channelling remittances to the priority investment projects can be powerful policy devices to imporve the external competitiveness and avert 'Dutch Disease' in Bangladesh

This paper analyses the main obstacles and policy recommendations in order to avoid the Dutch Disease in the Norwegian context. Originally affecting the economy of the Netherlands by decreasing their competitiveness after the discovery of Europe’s largest natural gas field in 1959 near Groningen, the Economist introduced the term in 1977. While the Netherlands recovered fast from their disease with persistent growth since the 1960’s, the Dutch Disease infected plenty of countries all around the globe. But how is it possible, that Norway as the third-largest crude oil exporter after Saudi Arabia and Russia worldwide remains one of the top countries regarding competitiveness and entrepreneurship?

Azerbaijan proclaimed its independence after the USSR collapse on August, 1991 and on October with the adoption of The Declaration of Independence it has become independent. The USSR had kept the economy dependent and prevented from fair competition for a long time. Azerbaijan which was known with its agriculture and industry during the period of the USSR has begun to develop on only one side since the middle of 20th century. As a result differences in the form of the development has been increased and Baku has gained priority. The Independent Azerbaijan Republic has had to struggle against not only economic distress but also differences in standards of living in different regions, internal chaos, social shock and Armenian invaders.
Azerbaijan government which decided to prevent crisis left central management and tried to attract foreign industry to the country using rich natural resources. Strategy which has been carried out since independence causing economic recovery has become financial support and it has improved standard of living. But unchangeable strategy used in oil and gas industry since the first years of the Azerbaijan Republic caused risks together with profits.
The first part of the study were discussed in general terms the Azerbaijan economy, industry, services and agriculture investigated in the form of headlines.
The second part deals with oil and gas industry which occupy major place in the country’s economy, statistic information and contracts with foreign oil companies.
In the third part economic panel data analysis has been used to identify the influence of oil industry on the economy of the government and the importance of non-oil sector. At the end of the part solutions and proposals are mentioned taking into consideration other parts and the results of the analyses.

Özet

Azerbaycan, 71 yıllık SSCB’nin dağılması üzerine, 30 Ağustos 1991 tarihinde bağımsızlığını ilan etmiş ve 18 Ekim 1991’de, Bağımsızlık Kanunu’nun kabul edilmesiyle resmi olarak bağımsız olmuştur. Uzun yıllar SSCB politik yapısında merkeze bağlı yönetim şekli, ekonomiyi diğer ülkelere bağımlı kılmış ve adil rekabet ortamının gelişmesine engel olmuştur. Söz konusu birlik döneminde tarım ve sanayi sektörü ile ön plana çıkan Azerbaycan ekonomisi, XX. yüzyılın ortalarından sonra tek taraflı gelişimi ile dikkat çekmiştir. Diğer bir ifadeyle, II. Dünya Savaşı yıllarında enerji ihtiyacının artması, ülke petrolüne ilgi uyandırmış ve petrol sanayi alanı hızlı şekilde gelişmeye başlamıştır. Öte yandan bu sistem ekonomide sektörel farklılaşma ile beraber bölgesel ayrışmaya da neden olmuştur. Sonuçta Azerbaycan, yalnızca ekonomik dengesizliklerle değil, aynı zamanda bölgesel farklılıklar, iç istikrarsızlıklar, sosyal bunalım ve Ermenistan’ın saldırıları ile mücadele etmek zorunda kalmıştır.
Ekonomiyi canlandırmak için açık piyasa ekonomisini tercih eden Azerbaycan, merkezi planlama yönetimini terk ederek zengin enerji kaynaklarını kullanma, yabancı sermayeyi ülkeye çekme kararı almış ve söz konusu strateji kısa zamanda ekonomiye mali kaynak sağlayarak, yaşam standartlarının yükselmesine neden olmuştur. Ancak cumhuriyetin ilk yıllarında, petrol ve doğalgaz sektöründe devam ettirilen değişmez strateji, ülkeye sermaye girmesi, ihracat gelirlerinin artması, uluslararası arenada statü kazanma gibi avantajlar sunması yanında ekonomiyi doğal kaynak gelirlerine bağımlı olma sorunu ile karşı karşıya koymuştur.
Üç bölümden oluşan bu çalışmanın ilk bölümünde, Azerbaycan ekonomisi genel olarak değerlendirilmekte; sanayi, hizmet, tarım ve hayvancılık sektörlerinin nispi konumu incelenmektedir. İkinci bölümde ekonominin esasını teşkil eden petrol ve doğalgaz sanayisi hakkında bilgilere yer verilerek sektörlerin istatistik verileri, yabancı kuruluşlarla yapılan anlaşmaları yansıtılmaktadır. Son bölümde ise, Azerbaycan ekonomisinin petrol gelirlerine bağlılığı ve petrol dışı sektörlerin ülke iktisadi durumu üzerindeki etkisinin tespit edilmesi için panel veri analizinden yararlanılmaktadır. Tahmin sonuçları yorumlanarak önerilere yer verilmektedir

Since the announcement, in 2007, of the pre-salt oil layer by the Brazilian Oil Company (Petrobras), there has been a lot of optimism about Brazil’s future economic development. Even before any extraction has been started off, pre-salt revenues have already been legally addressed to fund country-wide educational and health systems. Nevertheless, on one hand, the country formally subscribes to international negotiations on climate change to curb fossil fuel emissions; on the other hand, even though claiming to bear a clean energy matrix, it falls back on its newest oil reserves to support its future economic development. Nowadays, though, many leading economic countries have heavily invested in renewable rather than in fossil fuel energy sources. Moreover, alternative fossil options, such as shale gas, have become economically and technologically feasible. So, in this international context, is the ownership of a large oil reserve a blessing or a curse? The answer is given by a non-renewable resource multi-period model (Hotelling model). By drawing an optimal depletion price path along which extraction revenues would not dramatically rise or fall in response to a non-optimal programme, its objective is to prevent the “Dutch disease” and distortions in the oil volume to be eventually shared between the pre-salt reserve owner (government) and its exploiting companies. If market prices are higher than the optimal ones, the primary commodity is likely to be over-depleted and largely exported, thereby causing the exchange rate to over-appreciate and the demand for foreign, instead of domestic, goods to increase. Nonetheless, results show that optimal prices, quantities and economic lifetime of the resource critically rely on current estimates for the existing stock, oil prices and interest rates.

Chapter 1 Introduction
1.1 Background information
1.2 Scope of the problem
1.3 Research framework
Chapter 2 Energy Profiles of Central Asian Countries: Current Status and Future Prospects
2.1 Kazakhstan
2.2 Kyrgyz Republic
2.3 Tajikistan
2.4 Turkmenistan
2.5 Uzbekistan
2.6 Measuring the Security of External Energy Supply and Energy Export Demand in Central Asia
2.6.1 Methodology
2.6.2 Data
2.6.3 Results and Policy Implications
2.7 Summary
Chapter 3 Economy, Energy and the Environment in Kazakhstan
3.1 Economy of Kazakhstan
3.2 Energy System
3.2.1 Fossil Fuel
3.2.2 Coal
3.2.3 Crude Oil and Natural Gas
3.3 Environmental Problems in Kazakhstan
3.4 Modeling CO2 Emissions, Energy Use, and Economic Growth
3.4.1 Methodology
3.4.2 Data
3.4.3 Empirical Findings
3.5 The Dutch Disease in Kazakhstan
3.5.1 Methodology
3.5.2 Data
3.5.3 Empirical Findings
3.6 Summary
Chapter 4 Decomposition Analysis of Industry Sector CO2 Emissions from Fuel Combustion in Kazakhstan
4.1 Methodology
4.2 Data
4.3 Empirical Findings
4.4 Summary
Chapter 5 Power Industry
5.1 Electricity Generation
5.2 Commercial Heat Generation
5.3 Life Cycle Assessment of Commercial Heat and Electricity Production
5.3.1 Goal and Scope
5.3.2 Data
5.3.3 Methodology
5.3.4 Pre-Combustion
5.3.5 Combustion
5.3.6 Results and Discussion
5.3.7 External Costs of Power Production
5.4 Health Effects of Coal: A Long-Run Relationship Assessment of Coal Production and Respiratory Health in Kazakhstan
5.4.1 Methodology
5.4.2 Data
5.4.3 Empirical Findings
5.5 Potential of Renewable Energy in Kazakhstan
5.5.1 Solar Energy
5.5.2 Biomass and Geothermal Energy
5.5.3 Hydropower
5.6 Summary
Chapter 6 Wind Power in Kazakhstan
6.1 Wind Climates and Local Winds
6.2 Potential Assessment
6.2.1 Data
6.2.2 Methodology
6.2.3 Results and Discussion
6.3 Environmental Improving Effect of Wind Energy
6.4 Cost of Wind Energy
6.5 Multi-Criteria Analysis of Wind Power
6.5.1 Criteria Selection
6.5.2 Technical Criteria
6.5.3 Environmental Criteria
6.5.4 Socioeconomic Criteria
6.5.5 Methodology
6.5.6 Results and Discussion
6.6 Summary
Chapter 7 Green Growth Strategy of Kazakhstan
7.1 Effect of Kazakh Emissions Trading Scheme (ETS) on Industrial Energy Intensities
7.1.1 Methodology
7.1.2 Data
7.1.3 Results and Discussions
7.2 Summary
Chapter 8 Conclusions and Policy Implications
8.1 Policy Recommendations

Norway serves as a unique example of a developed country whose economy is dominated by export of natural resources. Thanks to its large petroleum reserves Norway has become one of the richest countries in the world. This thesis examines how the country has coped with its transformation and if it has avoided the so-called resource curse. It deals with the effects of the oil industry on the other sectors of the economy as well as on Norwegians’ wellbeing. As the revenue from the petroleum production has grown, the state has implemented number of economic policies with the aim to utilize it in favour of the weakened industries and the society as a whole. So far, the oil industry has brought Norway prosperity thanks to sound governance and fitting policies. The question is whether the measures are sufficient to tackle both the decreasing production and prices of oil while maintaining the advantage the country has gained.

Bangladesh had historically relished the fortune of being a labor surplus nation and therefore had accumulated remittances in large volumes over the last four decades. Thus, the concept of remittance-effectiveness in shaping the economy of Bangladesh emerges with utmost significance and importance amidst researchers and policy makers all around the globe. The aim of this paper is to identify the dynamics of real exchange rate movements following inflow of remittances in Bangladesh over the period of 1980 to 2013 and whether such movements caused Dutch disease problem in the country. This paper fills the gap in the empirical literature using the ARDL bounds testing approach to investigate the causal relationship between foreign remittance and real exchange rate exclusively in the context of Bangladesh. Augmented Dickey Fuller (ADF) test, ARDL cointegration test, ARDL Error Correction Model (ECM) approach and ARDL Engle-Granger causality test are used in the paper. The results confirm that there is a negative correlation between remittance and real exchange rate which implies that a rise in the volume of remittance inflows exert appreciative pressures on Bangladesh's real exchange rate. However, such real exchange rate movements were not translated into Dutch disease problems.

Książka prezentuje wysiłki rozwojowe krajów Rady Współpracy Państw Zatoki, których celem jest ucieczka przed chorobą holenderską i w efekcie uzależnieniem gospodarek od eksportu węglowodorów. 
Jest ona zwieńczeniem wieloletnich badań nad modelem funkcjonowania systemów politycznch oraz społeczno-ekonomicznych monarchii naftowych Zatoki Perskiej, prowadzonych w kraju i za granicą. Ich celem było uchwycenie, przeanalizowanie i opisanie przemian, zachodzących w poszczególnych monarchiach w zakresie polityki ekonomicznej państwa oraz skutków społecznych, jakie zmiany te przynoszą.

We evaluate from a welfare perspective three policy alternatives frequently proposed to deal with Dutch-disease problems originated from cyclical movements in commodity prices. Namely, fiscal rules for government expenditures, capital controls, and taxes to domestic lending. To this end, we develop a DSGE model of a small open economy with a sectoral decomposition that features three distinctive characteristics: financial frictions, a learning-by-doing externality in the industrial sector, and a fraction of households being non-Ricardian (credit constrained). The first two features induce inefficient relocations after commodity shocks, while the later is relevant to analyze the role of fiscal rules. We calibrate the model using Chilean data. For each of the policy tools, we analyze optimal simple rules from a welfare (Ramsey) perspective, describing how different households rank the several policy alternatives, and studying how each of the models features shape the optimal policy design. A general conclusion of the analysis is that the included Dutch-disease inefficiencies are of limited quantitatively relevance in analyzing the desirability of these policies from a welfare perspective.

Este artigo discute a hipótese da existência do fenômeno Dutch Disease no Brasil. Trata-se de avaliar se o boom das exportações de commodities tem afetado o setor industrial e incentivado a tendência de desindustrialização. Foi utilizado o IVCR – Índice de Vantagens Comparativas Reveladas com aplicação para o setor industrial com o propósito de levantar se a indústria brasileira perdeu competitividade no período 2000-2011. Verificou-se que a indústria brasileira apresentou indício de desindustrialização, entretanto essa perda de competitividade não possui relação com o boom das exportações de commodities, mas sim em decorrência de fatores relacionados ao alto custo de se produzir no Brasil, falta de investimentos em inovação e queda de produtividade do setor industrial.

Background The PGWBI is a 22-item health-related Quality of Life (HRQoL) questionnaire developed in US which produces a self-perceived evaluation of psychological well-being expressed by a summary score. The PGWBI has been validated and used in many countries on large samples of the general population and on specific patient groups. Recently a study was carried out in Italy to reduce the number of items of the original questionnaire, yielding the creation of a shorter validated version of the questionnaire (PGWB-S). The purpose of the present paper is to describe the methods adopted and to report and discuss the relevance of results. Methods Data for this study were collected from 4 different population samples: two general population samples a student and a patient sample. On the basis of the results of the first (development) sample population, six relevant items were identified statistically from the original questionnaire and grouped to assemble a new summary scale. Following the newly created 6-item questionnaire was administered in three independent population samples. Descriptive statistics, correlation coefficients, univariate and multivariate regression analyses were used to compare the performance of the long and short questionnaire, within and between population samples and across relevant subgroups. A further independent sample extracted by an ongoing cancer clinical trial served as final validation step. Results Overall, the questionnaires were administered to 1443 subjects. Six items were selected by a step-wise approach to explain 90% of the variance of the summary measure of the original questionnaire. Response rates reached 100%, while missing items were not observed. University students (n = 400) showed the highest mean value of the summary measure (75.3); while the patient sample (n = 28) had the lowest score (71.5). The correlation coefficients between the summary measures and the single items according to the different studies were satisfactory, reaching the highest estimates in the student sample. The internal consistency showed high values of the Cronbach's alpha coefficient (range 0.80 – 0.92) for all three study samples, coming close to the value of the coefficient established for the original questionnaire (0.94). A cross-validation in an independent sample of 755 cancer patients confirmed the item selection procedure and amount of variance explained by the new shorter questionnaire (ranging from 90. 2 to 95.1 %, across age and sex strata). Conclusion The newly identified PGWB-S showed good acceptability and validity for the use in various settings in Italy. The translation of the PGWB-S into different languages, and its use in other linguistic settings will add evidence about its cross-cultural validity.

It is usually claimed that countries that discover abundant natural resources (especially oil and gas) are likely to suffer from Dutch Disease (a kind of Natural Resource Curse). The symptoms of the Dutch Disease are often shown when a country’s currency appreciates and its traditional export sectors (agricultural and manufacturing sectors) become less competitive. The less competitiveness of the traditional export sectors eventually causes structural changes in the economy by reducing output and employment and increasing the general price level. This paper studied possible occurrence of Dutch Disease through four main transmission channels: currency appreciation effect, spending effect, resource movement effect and saving, investment and physical capital effect. The paper further investigates that corruption, conflict and political instability, mismanagement of oil revenues, over dependent on natural resources as primary exports and oil price fluctuations are likely factors that can cause oil curse in oil-rich nations.
It is asserted that Ghana may be a victim of the Dutch Disease as a result of its recently discovered oil. Therefore, it is the aim of this paper to analyze whether Ghana could be affected by the Dutch Disease through either currency appreciation effect, spending effect or the resource movement effect by examining the impact of the expected oil revenue inflows on Ghana’s exchange rate, agricultural output and its inflation. Since the oil revenue is yet to come in the future, the paper adopts an ex post study approach by using export earnings of gold as a proxy for the expected oil revenue inflows in the various tests. This paper uses Multiple Linear Regression (MLR) analysis to show that the Dutch Disease is less likely to occur in Ghana.
The paper discovered that the expected oil revenue inflows would rather cause the Ghana cedi to depreciate rather than to appreciate. Again, the paper discovered that the expected oil revenue inflows would have an insignificant negative impact on agricultural output and inflation.
Finally, the paper ends with policy recommendations such as using managed float to control the exchange rate, choosing monetary policies that are consistent with fiscal policies to stabilize the economy, diversifying the economy away from natural resource-based exports into a more income enhancing export products, and mapping out strategies to curtail corruption.

This paper examines how macroeconomic policies can be managed to accommodate a large inflow of foreign aid to combat the HIV/AIDS epidemic and still maintain macroeconomic stability. Because of the daunting scale of this epidemic, funds need to be disbursed urgently in order to contain its spread, yet some economists worry that rapidly scaling up foreign assistance for this purpose

Empirik tədqiqatlar təbii sərvətlərlə zəngin ölkələrə daxil olan yüksək gəlirlərin əmək bazarının gender balansına təsir etdiyini sübut edib. Bu siyasət sənədi Azərbaycanda qadın əməyinin yüksək neft gəlirlərinin nəticəsində məruz qaldığı mənfi təsirləri və onların amplitudasını azaltmaq üçün icra olunmalı olan dövlət siyasəti prinsiplərini tədqiq edir. Tədqiqat göstərir ki, yüksək neft və qaz gəlirlərinin fonunda Azərbaycanın bilavasitə qadın əməyinə yönəlik siyasəti yoxdur. Bu da öz növbəsində yüksək neft gəlirlərinin səbəb olduğu struktur dəyişiklərinin-iqtisadiyyatın real sektorunun göstəricilərində, məsələn, kənd təsərrüfatı, emal sənayesi və s.-nin göstəricilərində azalmalar-qarşısında müdafiəsiz qoyur. Problem kişilərin miqrasiyasının və fertillik dərəcəsinin yüksək olduğu regionlarda özünü daha kəskin olaraq ifadə edir. Nəzər alsaq ki, problemin kökündə yüksək neft gəlirləri dayanır, dövlətin qeyd olunan problemi aradan qaldırmaq üçün həm qeyri-neft sektorunu, həm də sırf qadın əməyini əhatə edəcək siyasətə malik olmasına bö-yük ehtiyac var. İcra ediləcək mümkün işlər zəncirinə istiqamət verəcək.

Poor management of earnings from valuable natural resources results in a syndrome known as Dutch Disease, characterised by real exchange rate appreciation, high labour costs, and structural imbalances in economic development. Often a product of rentier politics, Dutch Disease undermines long-term economic performance in resource dependent economies resulting in a ‘resource curse’. The conventional wisdom argues that institutions and state development at the time of a resource boom lock countries into divergent developmental trajectories. I argue that political coalitions lay the foundation for development of state and other institutions, and that changes in coalitions drive changes in policy responses to resource booms. Botswana's experience illustrates the argument. Botswana has not entirely avoided symptoms of Dutch Disease, but has kept them largely in check despite the fragility of state institutions when diamonds were discovered. A broad and stable political coalition duri...

This article examines the probable effect of the February 2009 devaluation of the Tenge on the Kazakhstan economy. Conventional wisdom holds that currency devaluation increases exports, protects domestic production, and preserves foreign exchange ...

Most explanations of social collapse highlight the ecological strain or the role of economic stratification but they hardly try to establish a link between the origins of prosperity and the causes of collapse. Our purpose is to establish such link, i.e. to provide an ex planation of collapse based on the origin of prosperity. For cultures of the Bronze Age, the prosperity came from metalworking, i.e. initially from a mining boom and then to the subsequent activities (bronze production) it allowed. In such context, the collapse can be the result of an economic crisis known in modern economic analysis as the " Dutch Disease " , a term that broadly refers to the harmful consequences of large increases in a country's income. Such explanation is particularly well suited to spell out the collapse of a Central European Early Bronze Age culture, the Únětice culture (2300-1600 B.C.).

Since 1991, Central Asia's vast oil and gas deposits have promised economic develop
ment for the impoverished region and have attracted the attention of major powers interested in accessing those resources for themselves. Kazakhstan's vast energy resources drew significant Western attention to Central Asia following the disintegration of the Soviet Union. Turkmenistan, the other energy export giant of Central Asia, has yet to live up to its real potential. Uzbekistan's large population accounts for the country's high domestic consumption and lower level of exports, despite its very high production levels. Uzbekistan will likely find its position as a local energy provider to Central Asia constrained in years to come. Turkmenistan remains dependent upon Russia's pipeline system. Despite a relative diversification of foreign trade in some sectors, Kazakhstan has been folded mostly into a sphere of Russian economic influence as well, except for the south of the country. Central Asia's energy trade could still bring prosperity to the region, but its domestic political volatility and complicated regional and global relationships may spoil such efforts.

Iran as an oil exporting country whose big part of its revenues come from direct sales of resources, has been considered vulnerable to Dutch Disease. The different analysis allude that the high dependency to oil revenues (or rents) has weakened the key industrial sectors, affecting to exports and imports of that country. As we will see in this analysis (written in Spanish), the non-oil exports have weakened and the imports of consumption manufactured goods increase by the volatility of price and exports quantity and oil, which is one of the Dutch Disease sign in Iranian economy. The oil-exporting countries where have no diversified its exporting industries, have to take appropriate measures to get rid from dependency to rents, and to promote export-oriented manufactured industries.

This paper discusses the causes and consequences of the current trend in which a principal driver of growth is inward remittances by workers deployed overseas. The main benefit of the phenomenon is an easing of the fiscal burden arising from the effectively large transfer from workers to the government. On the other hand, the “Dutch Disease” it causes takes a longterm toll on the tradables sector. The paper concludes that the fiscal payoffs from the phenomenon are best used by reinvesting these in the foundations of domestic competitiveness—particularly education and focused infrastructure—to offset the worst effects of the trend and prepare prudently for the time it ends or reverses.

Oil-rich countries have often times been confronted with the challenge of diversifying their economies away from oil dependence given the exhaustible nature of these fossil fuels. Investing in sovereign wealth funds has been one of the most ubiquitous ways of preparing for the post-oil period. Investing in sovereign wealth funds rather than directly injecting the oil revenues in the economy not only precludes the outbreak of the Dutch Disease (which is known for giving rise to an exchange rate appreciation, crowding out non-oil industries and keeping the economy reliant on oil), but it also saves for future generations. Yet, in the case of Azerbaijan, the Sovereign Wealth Fund of Azerbaijan (SOFAZ), founded in 1999, has only increased this reliance on oil. Using the rentier states theoretical framework, this paper will argue that the direct control over SOFAZ exercised by the president and the lack of consultation with the NGOs have made corruption easier, making the task of economic diversification more difficult. This has been possible because through corruption the president has often resorted to oil money to buy peace rather than invest it in economic diversification. As a result, since the foundation of SOFAZ, the country is more reliant, not less, on oil.