01814cas a2200253 a 4500 AALejournalIMF006667 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455202164 1018-5941 BD-DhAAL BD-DhAAL Medina Guzman, Juan Pablo. Is Exchange Rate Stabilization an Appropriate Cure for the Dutch Disease? / Juan Pablo Medina Guzman, Ruy Lama. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (43 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper evaluates how successful is a policy of exchange rate stabilization to counteract the negative effects of a Dutch Disease episode. We consider a small open economy model that incorporates nominal rigidities and a learning-by-doing externality in the tradable sector. The paper shows that leaning against an appreciated exchange rate can prevent an inefficient loss of tradable output but at the cost of generating a misallocation of resources in other sectors of the economy. The paper also finds that welfare is a decreasing function of exchange rate intervention. These results suggest that stabilizing the nominal exchange rate in response to a Dutch Disease episode is highly distortionary. Mode of access: Internet Lama, Ruy. IMF Working Papers; Working Paper ; No. 2010/182 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/182/001.2010.issue-182-en.xml IMF e-Library