Dutch disease and, more recently, resource curse thesis have been critical issues for developmentof resource abundant economies. This paper attempts a comparison between Indonesiaand Mexico in their policy adjustments to the oil boom with special reference to the Dutchdisease. There exists a striking contrast, especially in their fiscal, foreign borrowing, andexchange rate policies, and confirms the conventional understanding that a booming governmentshould be conservative, as was the case in Indonesia, in its macroeconomic managementto avoid the Dutch disease. Equally significant, investment use of oil revenues to strengthenthe tradable sector is another factor responsible for Indonesian success. Mexico provides aclear-cut example of the resource curse thesis, but Indonesia is an exception. © 1998 ElsevierScience Ltd. All rights reserved.
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