DUTCH-DISEASE AND POLICY ADJUSTMENTS TO THE OIL BOOM - A COMPARATIVE-STUDY OF INDONESIA AND MEXICO

Dutch disease and, more recently, resource curse thesis have been crit ical issues for development of resource abundant economies. This paper attempts a comparison between Indonesia and Mexico in their policy ad justments to the oil boom with special reference to the Dutch disease, There exists a striking contrast, especially in their fiscal, foreign borrowing, and exchange rate policies, and confirms the conventional understanding that a booming government should be conservative, as was the case in Indonesia, in its macroeconomic management to avoid the D utch disease, Equally significant, investment use of oil revenues to s trengthen the tradable sector is another factor responsible for Indone sian success, Mexico provides a clear-cut example of the resource curs e thesis, but Indonesia is an exception. (C) 1998 Elsevier Science Ltd . All rights reserved.