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In this paper, we assess whether recent economic developments in Russia are symptomatic of Dutch Disease. We first provide a brief review of the literature on Dutch Disease and the natural resource curse. We then discuss the symptoms of Dutch Disease, which include (1) real exchange rate appreciation; (2) slower manufacturing growth; (3) faster service sector growth; and (4) higher overall wages. We test these predictions for Russia while carefully controlling for other factors that could have led to similar symptoms. We conclude that, while Russia has all of the symptoms, the diagnosis of Dutch Disease remains to be confirmed.

Foreign Exchange --- Macroeconomics --- Economic Theory --- Industries: Manufacturing --- Industries: Service --- Energy: Demand and Supply --- Prices --- Industry Studies: Manufacturing: General --- Industry Studies: Services: General --- Resource Booms --- Manufacturing industries --- Currency --- Foreign exchange --- Economic theory & philosophy --- Oil prices --- Manufacturing --- Real exchange rates --- Services sector --- Dutch disease --- Service industries --- Economic forecasting --- Russian Federation --- Foreign exchange rates --- Economic development

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We review the literature on Dutch disease, and document that shocks that trigger foreign exchange inflows (such as natural resource booms, surges in foreign aid, remittances, or capital inflows) appreciate the real exchange rate, generate factor reallocation, and reduce manufacturing output and net exports. We also observe that real exchange rate misalignment due to overvaluation and higher volatility of the real exchange rate lower growth. Regarding the effect of undervaluation of the exchange rate on economic growth, the evidence is mixed and inconclusive. However, there is no evidence in the literature that Dutch disease reduces overall economic growth. Policy responses should aim at adequately managing the boom and the risks associated with it.

Exports and Imports --- Foreign Exchange --- Economic Theory --- Natural Resources --- Remittances --- Foreign Aid --- Economic Growth of Open Economies --- Resource Booms --- Agricultural and Natural Resource Economics --- Environmental and Ecological Economics: General --- Currency --- Foreign exchange --- Economic theory & philosophy --- Environmental management --- International economics --- Real exchange rates --- Dutch disease --- Natural resources --- Exchange rates --- Foreign aid --- Economic theory --- Environment --- Economic forecasting --- International relief --- Mozambique, Republic of --- Foreign exchange rates. --- Exports.

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The hydrocarbons sector has become one of the most dynamic economic activities in the Bolivian economy and the main driver of improved export performance and international reserve accumulation. The central role of the hydrocarbons sector in the economy is attributable to the high levels of investment made in the late 1990s, which permitted much higher production levels, particularly of natural gas. However those positive developments in the hydrocarbons sector have given rise to the possibility of a new case of "Dutch disease." While Bolivia's economy has already seen many benefits from its higher gas exports, especially in terms of lower external vulnerability and improved fiscal stance, the new resources could also limit the development of other economic sectors in terms of output and factor income. This paper explores the transmission channels of Dutch disease, as well as its main symptom, the appreciation of the real exchange rate.

Hydrocarbons --- Foreign exchange rates --- Economic aspects --- Bolivia --- Economic conditions. --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Rates --- Organic compounds --- Exports and Imports --- Foreign Exchange --- Economic Theory --- Industries: Energy --- Trade: General --- Hydrocarbon Resources --- Resource Booms --- Currency --- International economics --- Petroleum, oil & gas industries --- Economic theory & philosophy --- Real exchange rates --- Exports --- Natural gas sector --- Dutch disease --- Real effective exchange rates --- Gas industry --- Economic forecasting

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We study the optimal foreign exchange (FX) intervention policy in response to a positive terms of trade shock and associated Dutch disease episode in a small open economy model. We find that during a Dutch disease episode tradable production drops below the socially optimal level, resulting in lower welfare under learningby- doing (LBD) externalities. FX reserves accumulation improves welfare by preventing a large appreciation of the real exchange rate and by inducing an efficient reallocation between the tradable and non-tradable sectors. For an empirically plausible parametrization of LBD externalities, the model predicts that in response to a 10 percent increase in commodity prices FX reserves should increase by 1.5 percent of GDP. We also find that the welfare gains from optimally using FX reserves are twice as high as the gains from relying only on monetary policy. These results suggest that FX intervention is a beneficial policy to counteract the loss of competitiveness during a Dutch disease episode.

Foreign exchange rates. --- Foreign exchange rates --- Monetary policy --- International finance --- International monetary system --- International money --- Finance --- International economic relations --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Econometric models. --- Rates --- Investments: Energy --- Foreign Exchange --- Macroeconomics --- Economic Theory --- Commodity Markets --- Resource Booms --- Central Banks and Their Policies --- Open Economy Macroeconomics --- Currency --- Economic theory & philosophy --- Investment & securities --- Commodity prices --- Dutch disease --- Commodity booms --- Prices --- Economic theory --- Commodities --- Economic forecasting --- Commercial products --- Brazil

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This study derives structural implications of the Dutch disease in oil-exporting countries due to permanent oil price shocks from a typical model. We then test these implications in manufacturing sector data across a wide group of countries including oil-exporters covering 1977 to 2004. The results on oil-exporting countries are four folds. First, we find that permanent increases in oil price negatively impact output in manufacturing as consistent with the Dutch disease. Second, Evidence in the data shows that oil windfall shocks have a stronger impact on manufacturing sectors in countries with more open capital markets to foreign investment. Third, we find that the relative factor price of labor to capital, and capital intensity in manufacturing sectors appreciate as windfall increases. Fourth, we find that manufacturing sectors with higher capital intensity are less affected by windfall shocks than their peers, possibly due to a larger share of the effect being absorbed by more laborintensive tradable sectors. An implication of the fourth result is that having diverse manufacturing sectors in capital intensity helps cushion the volatility of oil shocks.

Petroleum industry and trade--Econometric models. --- International trade--Econometric models. --- Petroleum products--Prices--Econometric models. --- Finance: General --- Macroeconomics --- Economic Theory --- Industries: Manufacturing --- Resource Booms --- Energy: Demand and Supply --- Prices --- General Financial Markets: General (includes Measurement and Data) --- Industry Studies: Manufacturing: General --- Labor Economics: General --- Economic theory & philosophy --- Finance --- Manufacturing industries --- Labour --- income economics --- Dutch disease --- Oil prices --- Capital markets --- Manufacturing --- Labor --- Economic forecasting --- Capital market --- Labor economics --- Netherlands, The --- Petroleum industry and trade. --- International trade --- Petroleum products --- Econometric models. --- Prices. --- Income economics