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In economics, what is "Dutch disease"?

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In economics, what is "Dutch disease"?
posted Dec 6, 2019 by Maninder Bath

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Link between a spike in one part of the economy and a drop in another
Investopedia: "Dutch disease is primarily associated with a natural resource discovery, (but) it can likewise result from any large influx of foreign currency into a country, including foreign direct investment, foreign aid, or substantial increases in natural resource prices. The term "Dutch disease" was coined by The Economist magazine in 1977, when the publication analysed a crisis that occurred in the Netherlands, following discoveries of vast natural gas deposits in the North Sea in 1959. The newfound wealth and massive exports of oil caused the value of the Dutch guilder to rise sharply, subsequently making exports of all non-oil products less competitive on the world market. Unemployment rose from 1.1% to 5.1%, and capital investment in the country dropped. Dutch disease later became widely used in economic circles, as a shorthand way of describing the paradoxical situation where seemingly good news, such as the discovery of large oil reserves, negatively impacts a country's broader economy."

answer Dec 9, 2019 by Anuradha Tabyal
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