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Oil Prices and Real Exchange Rates in Oil-Exporting Countries: A Bounds Testing Approach
- The Journal of Developing Areas
- Tennessee State University College of Business
- Volume 45, Single Issue, Fall 2011
- pp. 309-318
- 10.1353/jda.2011.0020
- Article
- Additional Information
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.