Economic Papers Publications

Do Remittances Cause Dutch Disease in Resource Poor Countries of Central Asia?

Central Asia Economic Papers No. 18, January 2016

By Igor Eromenko

Dutch disease or resource curse is an adverse effect of high dependence on exports of natural resources, such as oil and gas, or other inflows, such as remittances or foreign aid. Dutch disease is known to lead to the appreciation of the real exchange rate,decline in tradable sectors (mostly industry and agriculture) and surge in non-tradable sectors (services). This means unfavorable development for an economy with growth in retail trade or construction, while production sectors atrophy. Such economies be-come vulnerable and may suffer if inflow of currency from natural resources or remittances dries out.  

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