Oil and food prices co-integration nexus for Indonesia: a non-linear autoregressive distributed lag analysis

This paper examines the relationship between the prices of oil and food price for Indonesia using non-linear autoregressive distributed lag (NARDL) method. The bound test for co-integration for the NARDL model shows the evidence of co-integration between food price, growth rate of gross domestic product and oil price. The estimated NARDL for the oil price in domestic currency provides strong evidence of long- and short-run co-integration between food and oil price when the latter increases while the relations for oil price reduction is not present and insignificant. The estimators of positive change in oil price model measured in US Dollar are significant in our study

Dutch disease effect of oil price on agriculture sector: evidence from panel cointegration of oil exporting countries

This study aims to investigate the long-run relationship between oil price and value-added share of GDP of agriculture in 25 oil-exporting countries. We use the panel heterogeneous cointegration test and fully modified OLS (FMOLS), dynamic (OLS) and pooled mean group (PMG) methods to examine the long-run effect of real oil price and real exchange rate on agriculture. The result of the Pedroni cointegration exposes the long-run relationship between the variables under study. Panel cointegration estimators show the negative and significant effect of oil price and exchange rate on agriculture value added. These results indicate the existence of the Dutch disease and de-agriculturalization in oil-exporting economies. The present study contributes to existing literature that concentrates on the Dutch disease and di-agriculturalization by analyzing the effect of real oil price and real exchange rate on the agricultural sector in the long- and short-run in developing oil-exporting countries

Dutch Disease effect of Oil Price on Agriculture Sector: Evidence from Panel Cointegration of Oil Exporting Countries

This study aims to investigate the long-run relationship between oil price and value-added share of GDP of agriculture in 25 oil-exporting countries. We use the panel heterogeneous cointegration test and fully modified OLS (FMOLS), dynamic (OLS) and pooled mean group (PMG) methods to examine the long-run effect of real oil price and real exchange rate on agriculture. The result of the Pedroni cointegration exposes the long-run relationship between the variables under study. Panel cointegration estimators show the negative and significant effect of oil price and exchange rate on agriculture value added. These results indicate the existence of the Dutch disease and de-agriculturalization in oil-exporting economies. The present study contributes to existing literature that concentrates on the Dutch disease and di-agriculturalization by analyzing the effect of real oil price and real exchange rate on the agricultural sector in the long- and short-run in developing oil-exporting countries. Keywords: oil price, agriculture, Dutch disease, panel cointegration.   JEL Classifications: B4, E3, Z3

Impact of oil revenue on economic growth, agriculture and tourism sectors of developing oil exporting countries

This study investigates the impact of oil revenue on economic growth, agriculture and tourism in developing oil-exporting countries, which are divided into major and minor oil-exporting countries based on their oil revenue shares to their respective GDPs. While developing oil-exporting countries have gained massive oil income, they suffer from Dutch disease in different manners, such as low economic growth and lagging non-oil sectors. Heterogeneities exist among developing oil-exporting countries. Panel Autoregressive Distributed Lag (ARDL) modelling is used to achieve the objectives of the study. The first objective of this study is to examine the impact of oil revenue on economic growth for 25 developing oil-exporting countries (major and minor), conditional to the different level of the real effective exchange rate. The results show that the longrun effect of oil revenue on economic growth is significant only for the full sample, while the effect is highly positive and significant in the short run for all groups. Also, the indirect effect of the marginal effect of oil revenue on economic growth is statistically insignificant for all groups. However, the indirect effect of the oil price on economic growth is statistically significant and confirms the same direction of the marginal effects of oil revenue for all groups. In the case of the major group, the indirect effect of oil price shows the symptom of Dutch disease and proving the existence of Dutch disease. That means that in major oil-exporting countries, the oil price is harmful for economic growth when the real effective exchange rate appreciates. The second objective of the present study is to investigate the impact of oil revenue on the agriculture sector of 25 developing oil-exporting countries (major and minor), conditional to the different level of the real effective exchange rate. The regression results of the baseline model indicate that oil revenue in the long and short term has adverse and highly significant effects on the value added of agriculture in the full sample, as well as in the cases of major and minor oil-exporting countries. Despite this result, the magnitude of the impact in the major oil-exporting countries is higher than that of the minor oil-exporting countries. The results of marginal effects for the minor group show that oil revenue indirectly slows down the value added of agriculture when the real effective exchange rate appreciates. Otherwise, oil revenue benefits agriculture if the real effective exchange rate depreciates. However, in the case of major group, the marginal effect shows that oil revenue decreases the value added of agriculture, even in the presence of real effective exchange rate depreciation. The third objective of this study is to find the relationship between oil revenue and the tourism sector of oil-exporting countries based on the different level of the real effective exchange rate. The estimations show a direct positive effect of oil revenue on tourism income for the entire sample, and for the minor group. The results show an adverse but insignificant for the major group. Additionally, the findings of the marginal effect of oil revenue on tourism income support the Dutch disease phenomenon for the entire sample and the major group. That means the marginal effects of oil revenue are negative and significant at the lower-level of the real effective exchange rate (appreciation) but positive and significant at the higher-level of the real effective exchange rate (depreciation). This result is contrary to the minor group but insignificant. Overall the findings and results support the hypotheses of this study, which focuses on the differential behaviour of major and minor oil-exporting countries toward economic growth and non-oil sectors (the agriculture and tourism sectors). More specifically, the results of the direct and indirect effects of oil revenue show that major oil-exporting countries suffer from Dutch disease. The results of this study have policy implications, pointing to the need to eliminate this phenomenon. First, it is necessary for governments of oil-exporting countries to adopt a fiscal policy that limits the role of spending effects as a source of appreciation to the real effective exchange rate. Secondly, policymakers should adopt and improve policy instruments that support and promote the non-oil sectors—including proper macroeconomic policy, such as enhancing public investment in the agriculture and tourism sectors. Finally, economic diversification is required. Using oil revenue to build high-quality infrastructure may improve the non-oil sectors. Then, dynamic growth in the oil sector may lead to sustainable economic growth in the long run

Oil and Food Prices Co-integration Nexus for Indonesia: A Nonlinear ARDL Analysis

This paper examines the relationship between the prices of oil and food price for Indonesia using Nonlinear Autoregressive distributed lag (NARDL) method. The bound test for co-integration for the NARDL model shows the evidence of co-integration between food price, growth rate of GDP and oil price. The estimated NARDL for the oil price in domestic currency provides strong evidence of long and short run co-integration between food and oil price when the latter increases while the relations for oil price reduction is not present and insignificant. The estimators of positive change in oil price model measured in US Dollar are significant in our study. Keywords: Oil price, Food price, NARDL, Indonesia JEL Classifications: B4; E

Oil revenue and agriculture value-added in oil-exporting countries: does the role of real exchange rate matter

Purpose: This study aims to investigate the contingent roles real effective exchange rates (REERs) play in mediating the effects of oil revenue on the agriculture sector value-added in 25 major and minor oil-exporting (MIOEC) countries during the period of 1975–2014. Design/methodology/approach: The panel autoregressive distributed lag (ARDL) estimator proposed by Pesaran et al. (1999) was relied upon to achieve the objectives of the study. This estimator involves a pool of small cross-sectional units over a long-time span that covers for 25 oil-exporting countries over 39 years (1975–2014). Findings: This paper reveals the following findings. Firstly, oil revenue has a direct negative effect on agricultural value-added in the short- and long-term. This finding holds for full sample and subsamples of major oil-exporting (MAOEC) and MIOEC countries. Further assessment reveals that the magnitude of the impact is larger for MAOEC than that of the MIOEC. Secondly, the finding for the long-run effect shows that the contingent effect of real exchange rate on the nexus between oil revenue and agricultural value-added is negative and statistically significant at the conventional level for the full sample. This suggests that, in the long-run, the appreciation in real exchange rates exacerbate the negative marginal effects of oil revenue on agricultural value-added in all oil-exporting countries. However, when sub-samples of MAOEC and MIOEC are considered, the contingent effect disappeared (become insignificant) in MAOEC while it is positive and statistically significant in MIOEC. Thus, in the long-run, the appreciation in real exchange rates diminishes the negative marginal effects of oil revenue on agricultural value-added in MIOEC. While oil revenue has a direct negative effect, its effect is also moderated by the variations in REERs in MIOEC in the long-run. Finally, in the short-run, fluctuations in the real exchange rate do not matter for the nexus of oil revenue and agriculture sector in these countries whether minor or MAOEC countries. Originality/value: This study contributes to the debate in the empirical literature on the Dutch disease effect and “oil curse”. Using the appropriate panel ARDL empirical framework, it provides evidence on how exchange rate variations in the oil-exporting countries influence the nature of the effects of the oil revenue on agricultural sectors in the long-run but not in the short-run. Contingent effects of REERs only appear to exist in MIOEC in the long-run

The impact of oil price shocks on the military expenditure of selected MENA oil exporting countries: symmetric and asymmetric cointegration analysis

This paper examines the symmetric and asymmetric effects of oil prices on military expenditure of selected the Middle East and North Africa (MENA) oil-exporting countries. Using Linear Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) frameworks on annual data covers from 1960 to 2014, this paper documents that oil prices and the military expenditure shares a stable long run relationship in all cases except Algeria. The ARDL empirical findings reveal that oil price has a positive and significant effect on military spending in all cases except Tunisia. The NARDL results further reveal the existence of asymmetric pieces of evidence that the increase in oil prices increases military spending while the decrease in oil prices reduces the military spending in the long-run for Saudi Arabia, Iran, Algeria, Kuwait, and Oman. In the short run, the results demonstrate the existence of asymmetry effect of oil price on military spending only for Iran