External and internal exchange rates and the Dutch disease: Evidence from a panel of oil-exporting African countries

Despite an increasing number of empirical studies on the Dutch disease in developing countries and the evidence that oil revenues tend to appreciate the real exchange rate, there are very few existing discussions about the definition of real exchange rates. This article intends to fill this gap by using different proxies of the real exchange rate and differentiating the internal and external real exchange rates for the agricultural and manufacturing sectors. Using Pooled-Mean-Group and Mean-Group estimates on a panel of nine African net oil-exporting countries, results show a clear appreciation of the exchange rates generated by an increase in oil revenues or international oil prices, except for the internal real exchange rate for manufacturing goods. This could imply that, in these African countries, oil revenues affect the competitiveness of agricultural sectors more clearly than the manufacturing ones. This article also tests potential cross-section dependence by implementing a Cross-sectionally augmented version of the Pooled-Mean-Group, which overall supports the previous results.