The paper "Boom or gloom? Examining the Dutch disease in two‐speed economies" by Bjørnland and Thorsrud (2016) discusses the economic implications of the Dutch disease in countries characterized by two-paced economies. Essentially, this economic phenomenon occurs when a sudden increase in the economic development of one sector (commonly a resource-rich sector) triggers a decline in other sectors. Using Australia and Norway as reference countries, Bjørnland and Thorsrud explore the effects of the Dutch disease on two-speed economies.
This research is vital as the subject matter explores the practicality of resource allocation in two-speed economies. It outlines how most economies decline in the face of sector-specific boom due to the redistribution of resources. Therefore, effectively understanding the dynamics of the Dutch disease could reshape policy formulation and implementation in resource-rich countries.
The authors have committed to a structural vector autoregressive (SVAR) approach to analyze the effects of the Dutch disease. They utilized a dataset comprising of macro-economic variables from Australia and Norway, spanning several years. The selected countries are suitable because they face significant resource income and continue to experience substantial macro-economic changes.
The research found a contrary result to the common view on the Dutch disease. Instead of an absolute decline in other sectors resulting from a boom in the resource sector, Bjørnland and Thorsrud found these sectors experience a relative decline, referring to growth at slower rates. Furthermore, an upswing in the resource sector causes a short-term depreciative effect on exchange rates, which facilitates a resource movement effect.
The findings of the study imply a revised perspective on the Dutch disease. It suggests that policy reaction to the Dutch disease should not be a matter of preventing resource movement, but rather one of managing the structural adjustment ensuring stable growth across all sectors of the economy.
In conclusion, the paper "Boom or gloom? Examining the Dutch disease in two‐speed economies" offers insightful conclusions about the Dutch disease's impact in two-speed economies. The revised perspective it introduces aids in implementing more effective economic management approaches to mitigate the detrimental effects of the Dutch disease.
Bjørnland, H.C. and Thorsrud, L.A., 2016. Boom or gloom? Examining the Dutch disease in two‐speed economies. The Economic Journal, 126(598), pp.2219-2256.
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