Abstract
The Dutch disease refers to an appreciation of the real exchange rate resulting from
increased exports and capital inflows within a country with a booming natural resource industry. This
elevated exchange rate feeds back into the rest of the economy and can crowd out domestic
manufacturing and other exporting sectors, leading to what has been ascribed as the resource curse.
This paper attempts to contribute to the literature by shedding some light on the existence of this
mechanism in Libya over the period 1970-2010. It applies a time series approach to explore the
relationship between oil price, gross domestic product, and trade balance as independent variables and
real exchange rate as dependent variable. Theoretically, a resource boom leading to the general
appreciation of the national currency negatively affects the economy, but this theoretical hypothesis is
not evident in the case of Libya. Our results suggest that a country may experience a resource curse,
but this may not be as a result of the Dutch disease of an appreciation of the real exchange rate.
Original language | English |
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Number of pages | 0 |
Journal | Ghanaian Journal of Economics |
Volume | 6 |
Issue number | 1 |
Early online date | Dec 2018 |
Publication status | Published - Dec 2018 |