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Pré-publication, Document de travail Année : 2011

Monetary Policy and the Dutch Disease in a Small Open Oil Exporting Economy

Résumé

In this paper, we compare, first, the impact of a windfall and a boom sectors on the economy of an oil exporting country and their welfare implications ; in a second step, we analyze how monetary policy should be conducted to insulate the economy from the main impact of these shocks, namely the Dutch Disease. To do so, we built a Multisector DSGE model with nominal and real rigidities. The main finding is that Dutch disease effect arise after spending and resource movement effects in the following cases : i) flexible prices and wages both in the case of a windfall and in the case of a boom ; ii) flexible wage and sticky price only in the case of a fixed exchange rate. In other cases, Dutch disease effect can be avoided if : prices are sticky and wages are flexible when the exchange rate is flexible ; iii) prices and wages are sticky whatever the objective of the central bank is in both cases : windfall and boom. We also compare the source of fluctuation that leads to Dutch disease effect and we conclude that the windfall leads to a strong e¤ect in terms of de-industrialization compared to a boom. The choice of flexible exchange rate regime also helps to improve welfare.
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Dates et versions

halshs-00654511, version 1 (22-12-2011)

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  • HAL Id : halshs-00654511 , version 1

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Mohamed Tahar Benkhodja. Monetary Policy and the Dutch Disease in a Small Open Oil Exporting Economy. 2011. ⟨halshs-00654511⟩
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