ECO209Y1 Chapter Notes - Chapter Case 9: United States Treasury Security, Pembina Institute, Mark Carney
Document Summary
Case study 9: dutch disease: the resource curse. Natural resources are a blessing, but may also entail some negative impacts. Refers to harmful consequences of increases in a country"s income, particularly due to natural resource discovery. Surge in natural resource prices, foreign assistance, direct foreign investment. Increase in wealth after discovery of natural gas in north sea. Made currency appreciate, dutch non-oil exports less competitive. Inflow of foreign currency as result of imports depreciates currency. Value of currency increased so much that dutch goods too expensive for foreigners, cheaper for dutch people to buy imported goods than domestic. In netherlands, commodity sector expanded rapidly due to discovery of gas. Particularly manufacturing, prices are constant markup over unit labor cost. Non-tradeable sector (only for domestic consumption, can be traded in international market; ie housekeeping, restaurants, construction) Another example of foreign aid is earthquake in haiti. Inflow of wheat drove price of wheat down in haiti.
