Fiscal policy can counteract Dutch disease, say Peru economists
A working paper published last month by the Central Bank of Peru finds that public investment can offset the effects of Dutch disease, if that investment generates positive externalities throughout the tradeable and non-tradeable sectors of the economy.
In their paper, Dutch disease and fiscal policy, economists Fabrizio Orrego and Germán Vega create a model in which a booming sector, that benefits from high international prices, induces Dutch disease, meaning that the tradeable sector suffers
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