BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 9/2007:
Dutch disease scare in Kazakhstan: Is it real?
Balázs Égert ()
and Carol S. Leonard
Abstract: In this paper we explore the evidence that would establish
that Dutch disease is at work in, or poses a threat to, the Kazakh economy.
Assessing the mechanism by which fluctuations in the price of oil can
damage non-oil manufacturing—and thus long-term growth prospects in an
economy that relies heavily on oil production—we find that non-oil
manufacturing has so far been spared the perverse effects of oil price
increases from 1996 to 2005. The real exchange rate in the open sector has
ap-preciated over the last couple of years, largely due to the appreciation
of the nominal exchange rate. We analyze to what extent this appreciation
is linked to movements in oil prices and oil revenues. Econometric evidence
from the monetary model of the exchange rate and a variety of real exchange
rate models show that the rise in the price of oil and in oil revenues
might be linked to an appreciation of the U.S. dollar exchange rate of the
oil and non-oil sectors. But appreciation is mainly limited to the real
effective exchange rate for oil sector and is statistically insignificant
for non-oil manufacturing.
Keywords: price level; inflation; Balassa-Samuelson; tradables; house prices; regulated prices; Europe; transition; (follow links to similar papers)
JEL-Codes: C22; E43; E50; E52; G21; O52; (follow links to similar papers)
39 pages, April 20, 2007
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