Managing Dutch Disease in China and Russia

June 23, 2008

This research seminar will focus on noted economist Al Harberger’s theory of “sterilization by the people.” Large, continuing inflows of foreign exchange in China from foreign direct investment and in Russia from oil sales have not been followed by higher rates of inflation and faster real exchange rate appreciation in those countries, as one would normally expect from the resulting growth in the domestic money supply. This discussion will identify a factor that is overlooked by most economists—that people in those countries have chosen to hold larger real cash balances of their own currency, in an effect termed “sterilization by the people.” Sterilization by the people acts to counter the increase in the domestic money supply caused by large inflows of foreign exchange, thereby reducing both the inflationary pressure on the non-tradable sector of the economy and the real appreciation of the currency normally associated with Dutch disease.

Featuring
Arnold C. Harberger 
Professor of Economics, University of California, Los Angeles
USAID Chief Economic Advisor, and Gustavus F. and Ann M. Swift Distinguished Service Professor Emeritus, University of Chicago 

Monday, June 23, 2008 
2:00pm—4:00pm 

at 
Center for Global Development 
1776 Massachusetts Avenue, NW, Third Floor, Washington, DC 
Nearest Metro: Red Line to Dupont Circle (South Exit)  

PLEASE RSVP TO  EVENTS@CGDEV.ORG