Evaluation of Dutch disease effect on oil‐exporting countries: An empirical estimation

Abstract

AbstractThe motive of the study is to examine real effective exchange rates (REER) for Dutch disease effect (DDE) and evaluate the favourite exchange rate regime (ERR) for oil exporters, besides considering the time effect and development stages. This study included yearly data from 2001 to 2010 for 51 oil‐exporting nations. For empirical estimation, this study employed the dynamic panel threshold model. The study deduced that a nonlinear relationship in net oil‐exporting countries. The findings revealed that oil‐exporting countries experiencing a reduction in non‐oil exports if the real exchange rate (RER) exceeds than 3% (from the previous year), validating the Dutch disease phenomenon in oil‐exporting countries. Moreover, exposure to this threat increases with a fixed ERR, developing countries and early periods of exporting oil. Specifically, the results of the study contribute to empirical knowledge in economic sciences and provide useful insights into political implications and strategic planning for policymakers in oil‐exporting countries.