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Dutch Disease and the Oil and Boom and Bust

Brock Smith ()

No 133, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

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 pro-cyclicality 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.

Keywords: Dutch disease; Oil; Resource Curse; Manufacturing; Trade (search for similar items in EconPapers)
JEL-codes: Q3 Q4 Q54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-his
Date: 2014
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