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Monetary Policy, Oil Stabilization Fund and the Dutch Disease

Jean-Pierre Allegret (), Mohamed Tahar Benkhodja and Tovonony Razafindrabe
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Mohamed Tahar Benkhodja: ESSCA, School of Management

No 2018-06, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis

Abstract: This paper contributes to the literature on the Dutch disease effect in a small open oil exporting economy. Specifically, our contribution to the literature is twofold. On the one hand, we formulate a DSGE model in line with the balanced-growth path theory. On the other hand, besides alternative monetary rules, the model introduces an oil stabilization fund, an oil price rule, and a fiscal rule. Our aim is to analyze to what extent the combinations between our alternative monetary rules and fiscal policy are effective to prevent a Dutch disease effect in the aftermath of a positive oil price shock. Our main findings show that the Dutch disease, through the spending effect, occurs only in the case of inflation targeting regime. An expansionary fiscal policy contributes to improve the state of the economy through its impact on the productivity of the manufacturing sector.

Keywords: Monetary Policy; Oil Stabilization Fund; Dutch disease; Oil Prices; DSGE model (search for similar items in EconPapers)
JEL-codes: E52 F41 Q40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ene, nep-mac, nep-mon and nep-opm
Date: 2018-03
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2018-06

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