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.

Interactive Investor
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 September 2024
  • August 2024
  • July 2024
  • June 2024
  • May 2024
  • April 2024
  • September 2022
  • August 2022
  • July 2022
  • February 2022
  • January 2022
  • November 2021
  • October 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • April 2020
  • March 2020
  • February 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • October 2018
  • September 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • May 2014
  • April 2014
  • January 2014
  • November 2013
  • October 2013
  • September 2013
  • May 2013
  • February 2013
  • January 2013
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • June 2012
  • May 2012
  • November 2011
  • August 2011
  • April 2011
  • March 2011
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • May 2008
  • April 2008
  • March 2008