Reviewing the literature on "Dutch disease," this article documents that shocks that trigger foreign exchange inflows appreciate the real exchange rate, generate factor reallocation, and reduce manufacturing output and net exports. It also finds that real exchange rate misalignment due to overvaluation and higher real exchange rate volatility reduces growth. The evidence is mixed and inconclusive on the effect of undervaluation on growth, but there is no evidence that Dutch disease reduces growth. Policy responses should aim at adequately managing the boom and the risks associated with it. Concerns about adverse growth effects of real appreciation have been explored for many years, going back at least to the "Dutch disease" literature of the early 1980s. Dutch disease refers to the effects of discoveries or price increases of natural resources that result in real exchange rate appreciation, factor reallocation, and de-industrialization (Magud and Sosa, 2010). Similar effects may stem
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