Dutch Disease Economics A case Study of Indonesia

Rini Yayuk Priyati


The term ‘Dutch disease’ was first used to describe the indirect effects of the boom in the gas sector
in the Netherlands in the 1960s on other sectors. This paper applies this framework to analyse
the impact of the 2007-2008 surge in oil and gas prices in Indonesia. It finds that this has induced a
real appreciation of the Rupiah. In contrast to ‘Dutch disease’ theory, it has been accompanied by
growth in agricultural and manufacturing exports. The simulation results suggest that the observed
real appreciation due to the booming energy has inhibited the growth of Indonesian exports of agricultural
and manufacturing products.
Keywords: Dutch disease, energy, agricultural and manufacturing exports

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Economic Journal of Emerging Markets (EJEM)
ISSN 2086-3128 (print), ISSN 2502-180X (online)
Published by:
Center for Economic Studies, Department of Economics,
Universitas Islam Indonesia, Indonesia.

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EJEM by http://journal.uii.ac.id/JEP/ is licensed under a Creative Commons Attribution 4.0 International License.