OIL PRICES AND REAL EXCHANGE RATES
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Date
2017
Authors
Alpysbayeva, Dinara
Journal Title
Journal ISSN
Volume Title
Publisher
Nazarbayev University School of Sciences and Humanities
Abstract
Fluctuations in oil prices during the last decade have reignited the interest in the
\Dutch Disease" hypothesis. The paper aims at identifying the presence of the Dutch
Disease and at assessing the importance of choosing the exchange rate regime that is less vulnerable to the consequences of the Dutch Disease. Using threshold autoregressive (TAR) model, the paper tests the validity of the Dutch Disease hypothesis on the largest 19 oil-exporting countries. As a result two countries - Nigeria and Norway -
were identi ed as experiencing the disease. The hypothesis that countries operating
under a xed exchange rate regime experience the consequences of the Dutch Disease
severely was tested using the random e ects model, identifying government expenditure
(GE), the ow of Foreign Direct Investment (FDI), money supply (M2), GDP per
capita (lGDPcap), GDP growth (GDP), terms of trade (Terms), trade openness
(Openness), and oil rents (Rents) as additional determinants of the Dutch Disease.
The study used the value added of the manufacturing sector as a proxy measure to the
presence of the Dutch Disease. According to the results, countries operating under xed
exchange rate regime on average have 2.31% less value added from the manufacturing
sector, suggesting that those countries face more severe consequences.
Description
Keywords
oil prices, Dutch Disease, threshold autoregressive model
Citation
Alpysbayeva Dinara (2017) OIL PRICES AND REAL EXCHANGE RATES. Nazarbayev University, School of Humanities and Social Sciences.