Dutch disease and the oil boom and bust

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 output increased significantly relative to non‐oil countries. These measures decreased gradually 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 from the windfall resulted in increased manufacturing activity.

Resource Discoveries, FDI Bonanzas, and Local Multipliers: Evidence from Mozambique

“…5 Our results can also be seen as in line with recent evidence that suggests that resources can be associated with increased service and manufacturing activity (Allcott and Keniston, 2018;James, 2015;Smith et al, 2014), though we only look at the short-run effects of resource discoveries.…”

Commodity Prices and Growth

“…The empirical literature provides a spectrum of findings ranging from little/no effect (Gelb, ; Sala‐i‐Martin and Subramanian, ; Black et al ., ; Caselli and Michaels, ), positive (Greasley and Madsen, ; Smith, ; Allcott and Keniston, ), to negative effect (Ismail, ; Rajan and Subramanian, ; Charnavoki and Dolado, ; Harding and Venables, ). Our model identifies in the substitutability between labour and commodity a key conditioning factor capable of rationalising this pattern.…”

Oil discovery, boom‐bust cycle and manufacturing slowdown: Evidence from a large industry level dataset

“…Price is measured in real US dollars and the vertical lines represent boom and bust periods. We follow the literature to identify the boom and bust periods (see Hamilton, 1983Hamilton, , 2009Hamilton, , 2011Kilian, 2008;Smith, 2019). As a robustness test, the 2002-2012 boom period is also broken up between 2002-2007 and 2009-2012 to account for the decline in oil price in 2008.…”

“…Our second identification strategy is based on oil price boom and bust cycle which is described by Bjørnland and Thorsrud (2016) as a major exogenous element that could potentially affect all sectors of the economy. We follow Hamilton (1983Hamilton ( , 2009Hamilton ( , 2011, Kilian (2008) and Smith (2019) to identify boom bust periods. The boom periods are 1974-1980 (boom1) and 2002-2012 (boom2) and the bust period is 1981-1986.…”

“…Due to these data limitations, Smith (2019) concedes that his estimates of the effects of oil on manufacturing value added based on the UNIDO data are unreliable relative to his estimates on manufacturing exports based on the NBER-UN data. Furthermore, Smith (2019) assigns treatment countries based on resource dependency measured by resource revenue to GDP ratio in 1974. We follow a similar methodology while assigning treatment but exclude net oil importers.…”