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Oil-Price Boom and Real Exchange Rate Appreciation

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  • International Monetary Fund
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    Abstract

    The paper employs a heuristic comparative approach suggested by Ismail (2009) to search for evidence of Dutch disease in oil-rich countries of the Central African Economic and Monetary Community (CEMAC). While these countries have benefitted from high international oil prices in recent years, they have also experienced relatively large real exchange rate appreciations, raising concerns regarding the presence of Dutch disease and casting doubts on their ability to achieve high growth and employment in the long run. To isolate from any dynamics related to the exchange rate regime, we focus on the 14 member countries that constitute the CFA franc zone. We separate them into net oil importers and net oil exporters and look at economic growth, the real exchange rate, and the agricultural and external sectors. Based on traditional models, our findings are broadly consistent with the presence of Dutch disease in the second group during the oil-price boom. Departing from these models yields mixed results, suggesting the need to employ a case-by-case approach.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/268.

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    Length: 29
    Date of creation: 01 Nov 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/268

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    Related research

    Keywords: Natural resources; Agricultural sector; Central African Economic and Monetary Community; Exchange rate appreciation; Exchange rate regimes; Global competitiveness; Oil exporting countries; Oil prices; Oil sector; Real effective exchange rates; exchange rate; real exchange rate; oil importers; real exchange rate appreciation; oil exporters; oil production; exchange rate changes; real exchange rate changes; oil-importing countries; oil exports; crude oil; oil industry; exchange rates; crude oil production; foreign exchange; natural gas; oil and gas; oil refining; real exchange rate depreciation; exchange rate depreciation; exchange rate regime; real exchange rates; real exchange rate appreciations; gas production; exchange rate appreciations; gas reserves; oil company; opec; real exchange rate dynamics; oil reserves; exchange rate dynamics; international oil prices; million barrels; nonrenewable resources; energy information administration; gas field; effective exchange rate; proven natural gas; fuel production; offshore oil fields; national oil; real exchange rate overvaluation; downstream oil industry; overvalued exchange rates; crude oil exports; natural gas field; oil producers; foreign investment; oil fields; oil resources; oil importing countries; fuel products; natural gas reserves; exchange rate determination; oil wells; oil producing; real exchange rate overvaluations; offshore gas; oil revenues; real effective exchange rate; exchange rate overvaluation; oil companies; world market prices; exchange rate overvaluations; petroleum exporting countries;

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    1. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
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    12. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1999. "A Mixed Blessing," Macroeconomic Dynamics, Cambridge University Press, vol. 3(02), pages 204-225, June.
    13. Amuedo-Dorantes, Catalina & Pozo, Susan, 2004. "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts," World Development, Elsevier, vol. 32(8), pages 1407-1417, August.
    14. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2008. "Do Terms of Trade Drive Real Exchange Rates? Comparing Oil and Commodity Currencies," Working Papers 2008-32, CEPII research center.
    15. Masanao Aoki & Sebastian Edwards, 1982. "Export Boom and Dutch Disease: A Dynamic Analysis," UCLA Economics Working Papers 269, UCLA Department of Economics.
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