The Structural Manifestation of the 'Dutch Disease’: The Case of Oil Exporting Countries
By Kareem Ismail. Social Science Research Network, 2010
218 citations recorded by the source corpus.
This study derives structural implications of the Dutch disease in oil-exporting countries due to permanent oil price shocks from a typical model. We then test these implications in manufacturing sector data across a wide group of countries including oil-exporters covering 1977 to 2004. The results on oil-exporting countries are four folds. First, we find that permanent increases in oil price negatively impact output in manufacturing as consistent with the Dutch disease. Second, Evidence in the data shows that oil windfall shocks have a stronger impact on manufacturing sectors in countries with more open capital markets to foreign investment. Third, we find that the relative factor price of labor to capital, and capital intensity in manufacturing sectors appreciate as windfall increases. Fourth, we find that manufacturing sectors with higher capital intensity are less affected by windfall shocks than their peers, possibly due to a larger share of the effect being absorbed by more laborintensive tradable sectors. An implication of the fourth result is that having diverse manufacturing sectors in capital intensity helps cushion the volatility of oil shocks.
Subfields: Epidemiology, Pathology and Forensic Medicine
View Paper: https://www.semanticscholar.org/paper/c52a88abff1bd7f5a5ed770106c9b0469d217ab7
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Citations in the corpus
- Dealing with Dutch Disease (2010, background): “Recently, though, much stronger evidence of Dutch disease is presented by Ismail (2010), who studies the impact of oil price shocks using detailed, disaggregated sectoral data for manufacturing and allowing for the possibility that the extent of Dutch disease will depend on the capital intensity of…”
- Boom or Gloom? Examining the Dutch Disease in Two-Speed Economies (2014, background): “…including only a single sector in the non-resource economy, typically manufacturing or domestic output, see, e.g., Hutchison (1994), Bjørnland (1998) and Dungey et al. (2014), or a panel data approach studying common movements in manufacturing across numerous countries, see, e.g., Ismail (2010).”
- Analyzing time–frequency relationship between oil price and exchange rate in Pakistan through wavelets (2015, background): “Treviño, [47] disclosed the relationship between oil price and exchange rate in oil-rich countries of the Central”
- Boom-Bust Cycle, Asymmetrical Fiscal Response and the Dutch Disease (2010, background): “Moreover, the lack of downward adjustment in real effective exchange rate during commodity busts may have consequences on the economic performance of resource rich countries.”
- Absorbing a Windfall of Foreign Exchange: Dutch Disease Dynamics (2013, background): “…sectoral data for manufacturing finds that a 10% increase in the size of the windfall is on average associated with a 3.4% fall in value added across manufacturing, but less so in countries that have restrictions on capital flows and for sectors that are more capital intensive (Ismail, 2010).”
- When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth (2013, unknown): “Ismail (2010) builds a static model.”
- The Implications of Natural Resource Exports for Nonresource Trade (2016, unknown): “Ismail (2011) uses data on manufacturing industries in oil-exporting countries and estimates a negative relationship between oil-prices and industry output.”