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Dutch Disease and the Oil and Boom and Bust

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  • Brock Smith

Abstract

This paper examines the impact of the oil price boom in the 1970s and the subsequent bust on non-oil economic activity in oil-dependent countries. During the boom, manufacturing exports and value added increased significantly relative to non-oil dependent countries, along with wages, employment, and capital formation. These measures decreased, though to a lesser and more gradual extent, during the bust and subsequent period of low prices, displaying a positive relationship with oil prices. However, exports of agricultural products sharply decreased during the boom. Imports of all types of goods displayed strong procyclicality with respect to oil prices. The results suggest that increased local demand and investment spillovers induced by the oil revenue windfall resulted in increased manufacturing activity.

Suggested Citation

  • Brock Smith, 2014. "Dutch Disease and the Oil and Boom and Bust," OxCarre Working Papers 133, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  • Handle: RePEc:oxf:oxcrwp:133
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    References listed on IDEAS

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    Cited by:

    1. Torfinn Harding & Radoslaw Stefans & Gerhard Toews, 2020. "Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation," Economic Journal, Royal Economic Society, vol. 130(630), pages 1715-1728.
    2. James Cust & Torfinn Harding & Pierre-Louis Vézina, 2019. "Dutch Disease Resistance: Evidence from Indonesian Firms," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1205-1237.
    3. Pierre-Louis Vezina, 2017. "Resource discoveries and FDI bonanzas: An illustration from Mozambique," OxCarre Working Papers 199, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    4. Hilde C. Bjørnland & Leif Anders Thorsrud, 2019. "Commodity prices and fiscal policy design: Procyclical despite a rule," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(2), pages 161-180, March.
    5. Eric W. Djimeu & Luc-Désiré Omgba, 2018. "Oil windfalls might not be the problem in oil-producing countries: evidence from the impact of oil shocks on export diversification," EconomiX Working Papers 2018-18, University of Paris Nanterre, EconomiX.
    6. Keller, Michael, 2020. "Wasted windfalls: Inefficiencies in health care spending in oil rich countries," Resources Policy, Elsevier, vol. 66(C).
    7. Nouf Nasser Alsharif, 2017. "Three essays on growth and economic diversification in resource-rich countries," Economics PhD Theses 0317, Department of Economics, University of Sussex Business School.
    8. José Fuinhas & António Marques & Alcino Couto, 2015. "Oil rents and economic growth in oil producing countries: evidence from a macro panel," Economic Change and Restructuring, Springer, vol. 48(3), pages 257-279, November.
    9. Alhaji Jibrilla Aliyu & Shehu Mohammed Tijjani & Caroline Elliott, 2015. "Asymmetric cointegration between exchange rate and trade balance in Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1045213-104, December.
    10. Abbas Al-Mejren, 2015. "Impacts of Fiscal Legal Setting and Institutions on Budget Outcomes in the Rentire State of Kuwait," Working Papers 920, Economic Research Forum, revised Jun 2015.
    11. Djimeu, Eric W. & Omgba, Luc Désiré, 2019. "Oil windfalls and export diversification in oil-producing countries: Evidence from oil booms," Energy Economics, Elsevier, vol. 78(C), pages 494-507.

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    Keywords

    Oil; Dutch Disease; Resource Curse; Manufacturing; Trade;

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