Research points to a new explanation of “Dutch disease”


IN 1959 geologists discovered 2.8trn cubic metres of natural gas—the largest field in Europe—under the city of Groningen in the Netherlands. Cheap gas and free-spending energy firms were thought to be good news for the entire Dutch economy. But higher gas-export prices in the 1970s raised the value of the guilder by a sixth, hitting the competitiveness of Dutch manufacturing and services. In 1977 The Economist dubbed this economic curse “Dutch disease”.

Other resource-rich countries have tried to avoid this trap. Some have adopted fixed exchange rates to prevent their currencies appreciating. Others save capital inflows in sovereign-wealth funds to avoid distorting their economies. Yet many still have underdeveloped non-commodity sectors. And despite having plenty of cash to invest, banks are particularly affected.

Two recent IMF papers point to a new explanation of why commodity exporters have such stunted banks. The problem, they…