We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Commodity currency reactions and the Dutch disease: the role of capital controls.
- Authors
Chen, Kai; Lee, Dongwon
- Abstract
Commodity booms generally induce real exchange rate appreciation in commodity-rich economies and make other tradable sectors less competitive. This "Dutch disease" phenomenon has been blamed for leading to structures of production with low diversification and undermining sustainable growth. In this paper, we explore whether capital controls can mitigate the transmission of commodity price changes to the real exchange rate and shield manufactured exports. Examining a panel of 37 commodity-abundant countries over the period 1980–2020, we find that a steeper commodity currency appreciation indeed has a more detrimental impact on manufactured exports. Restrictions on capital flows tend to reduce real appreciation pressures and the severity of the Dutch disease. Countercyclical capital controls seem to help foster economic diversification in commodity-dependent developing countries.
- Subjects
CAPITAL controls; PRICES; CAPITAL movements; FOREIGN exchange rates; HARD currencies; DEVELOPING countries
- Publication
Empirical Economics, 2023, Vol 65, Issue 5, p2065
- ISSN
0377-7332
- Publication type
Article
- DOI
10.1007/s00181-023-02423-9