Natural Resources and the Macroeconomy

A striking feature of the world economy in the 1970s and 1980s has been the frequency and magnitude of the shocks to many economies because of changes in the price or availability of natural resources. Resource-poor countries have suffered, of course, but paradoxically resource-rich countries have not been immune. Resource-based booms have frequently been blamed for a tendency towards deindustrialization. This and related problems have been dubbed the 'Dutch Disease' - a reference to the difficulties experienced by The Netherlands following the exploitation of its natural gas reserves in the 1960s. This book represents the first attempt to combine both theoretical and empirical studies of the phenomenon. It contains the proceedings of a June 1985 conference organized by the Centre for Economic Policy Research in London and attended by leading economists working in this area. An introductory chapter reviews the theoretical literature dealing with the Dutch Disease and this is followed by eight chapters which examine the problems of particular countries. The concluding round-table discussion reviews the state of knowledge on the subject and provides a fascinating insight into the wide range of views of professional economists on the consequences of natural resource booms and the appropriate policy responses to them.