DEVELOPMENT: IMPACT OF THE "DUTCH DISEASE " ON SAUDI ARABIAN DIVERSIFICATION EFFORTS

R ecent theoretical research on the overall economic effects of oil revenues on economic growth indicates that their net impact may well be much less than originally an-ticipated. Specifically, government domes-. tic expenditure of oil revenues inevitably leads to real exchange-rate appreciation. Exchange-rate appreciation or the so-called "Dutch disease " should ultimately result in a contraction in the non-oil export sector with inflation and expansion taking place in the non-traded-goods sector. As Al-Sabah notes 1 the Dutch disease is not unique to oil-exporting countries, but has occurred in a variety of environments: 1. The national gas discoveries in the Netherlands in the 1960s led to an appreci