Dutch Disease: digging deeper

Natural resources and remittances have both been designated and researched as sources of Dutch Disease effects. This has always been in separation, without comparing the two based on a similar dataset. This paper’s scope is twofold. Firstly, it uses panel data analysis to show that remittances and rents on natural resources have a strong adverse effect on the real effective exchange rate (REER) in particular, which is even stronger for countries relatively more exposed to remittances and exports of natural resources. Secondly, it researches the firm dynamics within the manufacturing industry, in the intensive and extensive margin. We find that remittances and rents on natural resources cause exporters to increase the amount of products and the number of destination countries. We also find a greater degree of concentration among the largest exporters as a result of Dutch Disease effects.