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Cited by 112Market Dynamics and VolatilityMonetary Policy and Economic ImpactGlobal Financial Crisis and Policies

The Structural Manifestation of the ‘Dutch Disease’: The Case of Oil Exporting Countries

Open access
Ismail, Kareem·2010·IMF Working Papers
DOI 10.2139/ssrn.1594548
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Abstract

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.

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Crossref · 10.5089/9781455200627.001

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  • A 10 percent increase in a measure of oil revenues is associated with an average 3.4 percent fall in value added across manufacturing.

    “while Ismail (2010) finds that a 10 percent increase in a measure of oil revenues is associated with an average 3.4 percent fall in value added across manufacturing.”

    From Using Natural Resources for Development: Why Has It Proven So Difficult? (2016) · cites this paper as Ismail (2010)

    The study summary in our copy (section labeled “24 Field Citation Ratio”; no page given) says that permanent oil-price increases negatively affect manufacturing output in oil-exporting countries. It does not give the claimed 10 percent increase in oil revenues or the average 3.4 percent fall in manufacturing value added; searches for those figures returned no matching passage. (LLM, conf=0.82)

    Experimental — accuracy not yet measured

  • Cross-country empirical work confirms that resource exports are associated with smaller tradable goods sectors.

    “and cross-country empirical work confirms that resource exports are associated with smaller tradable goods sectors.”

    From Using Natural Resources for Development: Why Has It Proven So Difficult? (2016) · cites this paper as Ismail (2010)

    The indexed paper summary (section labeled “24 Field Citation Ratio”; no page given) reports a cross-country analysis finding that permanent oil-price increases negatively affect manufacturing output in oil-exporting countries. That supports the claim’s direction, but the evidence concerns oil-price shocks and manufacturing, not resource exports generally or the size of all tradable-goods sectors. (LLM, conf=0.87)

    Experimental — accuracy not yet measured

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Authors
Ismail, K.
Affiliations
International Monetary Fund (US)
Corresponding author
Ismail, Kareem
Venue
IMF Working Papers
Publisher
International Monetary Fund (IMF)
Published
2010-04
Volume
2010
Issue
103
Pages
1
ISSN
  • 1556-5068 (ISSN-L)
  • 1018-5941
DOI
10.2139/ssrn.1594548
OpenAlex
W2094449200
Cited by
111
References
22
Citations by year
2025: 2 · 2024: 4 · 2023: 9 · 2022: 7 · 2021: 5 · 2020: 1 · 2019: 10 · 2018: 9 · 2017: 14 · 2016: 8 · 2015: 10 · 2014: 11 · 2013: 7 · 2012: 6
Type
posted content
Language
en
Open access
Locations
  • SSRN Electronic Journal (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Market Dynamics and Volatility
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Social Sciences › Economics, Econometrics and Finance › Finance › Global Financial Crisis and Policies
Keywords
Dutch disease, oil price shocks, oil-exporting countries, manufacturing sector output, capital intensity, capital market openness, foreign investment, oil windfalls, tradable sector, sectoral diversification, oil price volatility

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