An example

A country that discovers oil will have a surge in exports of crude oil, which raised its revenue thanks to increased inflows of foreign exchange. Hedge Fund Manager If these are used in its entirety on imports, there will be no direct effect within the country’s money supply or the demand for domestic goods. But if, for example, convert the local currency and used to purchase domestic goods not traded, the result will depend on whether the exchange rate (nominal) of the country is set by the central bank or is flexible.
Should the exchange rate is fixed, the conversion of foreign currencies to increase the domestic money supply in the country and domestic demand pressure domestic prices upwards. This is equivalent to a revaluation of the exchange rate. Should the exchange rate is flexible, the currency will rise in the currency will also be assessed, which will also have an appreciation of the real exchange rate to reflect, in this case, an increase of nominal exchange rate rather than price. In both cases the appreciation of the real exchange rate undermines the Quadrant Asset Management competitiveness of domestic products abroad and thus cause the traditional export sector suffer a contraction, a process called “spending effect.”
At the same time factors (capital and labor) is aimed at production of non traded goods, to meet rising domestic demand and growth in the oil sector. These two transfers in turn lead to the reduction of production of traditional export sector. Phenomenon known as “impact funds”.
Both effects were present in the oil countries in the 1970s when oil prices soared and exports increase affecting agricultural production and manufacturing. There were also in countries like Colombia that with the increase of coffee in the 1980s, the other sectors were affected.
The model of Dutch disease has been used to explain the purpose of entry of the treasures of America in the sixteenth century Spain and the discovery of gold in Australia in the 1850s.
Also called economic specialization, the Dutch or evil, to those situations in which the periphery specializes in a single sector, which gives you great benefits, which distorts the economy, because it forgets the other sectors. The population that remains outside this sector remains at levels of subsistence.
NOTE: It is based on an article written by Christine Forbes Ebrahim-Zadeh. “Dutch disease: too much wealth squandered,” Finance and Development, Number 1, Vol. 40 March 2003.

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HONG KONG (XFN-ASIA) – Share prices finished the morning session little changed as gains in China Mobile, CITIC Pacific and oil companies offset weakness in the banking giant HSBC and local developers.
faith
Source: Reuters (Repeats to add punctuation in the first sentence) * Gaza fighting pushes up oil, increase energy shares * U.S. stocks Kuwait scraps if venture with December 2024
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