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OIL PRICES AND REAL EXCHANGE RATES IN OIL-EXPORTING COUNTRIES: A BOUNDS TESTING APPROACH

Mohammad R. Jahan-Parvar and Hassan Mohammadi
The Journal of Developing Areas
Vol. 45 (Fall 2011), pp. 313-322
Stable URL: http://www.jstor.org/stable/23215276
Page Count: 10
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
OIL PRICES AND REAL EXCHANGE RATES IN OIL-EXPORTING COUNTRIES: A BOUNDS TESTING APPROACH
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Abstract

We test the validity of the Dutch disease hypothesis by examining the relationship between real oil prices and real exchange rates in a sample of fourteen oil exporting countries. Autoregressive distributed lag (ARDL) bounds tests of cointegration support the existence of a stable relationship between real exchange rates and real oil prices in all countries, suggesting a strong support for the Dutch disease hypothesis. As for short-run, there are evidence of causality from oil prices to exchange rates in four countries; from exchange rates to oil prices in two countries; and bidirectional relations in another four countries. There is no evidence of causality in the remaining four countries.

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