Do oil sanctions reduce Dutch disease phenomenon? A quasi-experimental approach evidence from Iran

Saleh Ghavidel Doostkouei (), Mir Hossein Mousavi () and Mohammad Sharif Karimi ()
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Saleh Ghavidel Doostkouei: Islamic Azad University
Mir Hossein Mousavi: Alzahra University
Mohammad Sharif Karimi: Monash University Malaysia

International Economics and Economic Policy, 2024, vol. 21, issue 2, No 6, 385-410

Abstract: Abstract Economists have hypothesized that currency appreciation resulting from oil production in oil-rich countries can suppress the production of tradable goods, a phenomenon known as Dutch disease, often assessed using econometric models. This study leverages sanctions on Iranian oil exports, employing a quasi-experimental design with two distinct periods (1959–2020): one marked by sanctions (oil revenue recession) and the other by non-sanctions (oil revenue boom). The result shows a reversal of the Dutch disease effect during sanctions, leading to a real depreciation of the national currency and heightened production of tradable goods over non-tradable ones. The observed pattern of the real exchange rate aligns with Dutch disease dynamics, depreciating during sanctions and appreciating during non-sanction periods. Furthermore, the tradable sector exhibited increased share and real output growth compared to the non-tradable sector during the sanction period.

Keywords: Sanction; Dutch disease; Oil export; Tradable and non-tradable; Real exchange rate; Iran (search for similar items in EconPapers)
JEL-codes: F14 F31 O24 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10368-024-00584-1

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