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Dutch Disease-cum-financialization Booms and External Balance Cycles in Developing Countries
- Source :
- Brazilian Journal of Political Economy v.37 n.3 2017, Revista de Economia Política, EDITORA 34, instacron:EDITORA_34, Brazilian Journal of Political Economy, Vol 37, Iss 3, Pp 459-477
- Publication Year :
- 2017
- Publisher :
- Centro de Economia Política, 2017.
-
Abstract
- We formally investigate the medium-to-long-run dynamics emerging out of a Dutch disease-cum-financialization phenomenon. We take inspiration from the most recent Colombian development pattern. The “pure” Dutch disease first causes deindustrialization by permanently appreciating the economy’s exchange rate in the long run. Financialization, i.e., booming capital inflows taking place in a climate of natural resource-led financial overoptimism, causes medium-run exchange rate volatility and macroeconomic instability. This jeopardizes manufacturing development even further by raising macroeconomic uncertainty. We advise the adoption of capital controls and a developmentalist monetary policy to tackle these two distinct but often intertwined phenomena.
- Subjects :
- Deindustrialization
Dutch disease
Sociology and Political Science
lcsh:HB71-74
Monetary policy
financialization
lcsh:Economics as a science
Developing country
Monetary economics
International economics
Boom
Exchange rate
Capital (economics)
Political Science and International Relations
Economics
Financialization
exchange rate volatility, developmentalist monetary policy
General Economics, Econometrics and Finance
Subjects
Details
- Language :
- English
- ISSN :
- 01013157
- Database :
- OpenAIRE
- Journal :
- Brazilian Journal of Political Economy v.37 n.3 2017, Revista de Economia Política, EDITORA 34, instacron:EDITORA_34, Brazilian Journal of Political Economy, Vol 37, Iss 3, Pp 459-477
- Accession number :
- edsair.doi.dedup.....95f49bd12f5048e31ca0d3812c079855