The Linkage between the Oil and Non-oil Sectors--A Panel VAR Approach

Author/Editor: Klein, Nir
Publication Date: May 01, 2010
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Recent empirical studies have shown an inverse relation between natural resource intensity and long-term growth, implying that the natural resources generally impede economic growth through various channels (the “natural resource curse”). This paper departs from these studies by exploring the intersectoral linkages between oil and non-oil sectors in a cross-country perspective. The paper shows that the applicability of “natural resource curse” across oilbased economies should be treated with caution as the externalities of the oil sector highly depend on the countries’ degree of oil-intensity. In particular, the results show that, in low oil-intensity economies, the incentives to strengthen both fiscal and private sector institutions lead to positive inter-sectoral externalities. In contrast, weaker incentives in high oil-intensity economies adversely affect fiscal and private sector institutions and consequently lead to negative inter-sectoral externalities.
Series: Working Paper No. 10/118
Subject(s): Angola | Cross country analysis | Economic growth | Economic models | Exchange rate appreciation | Natural resources | Nonoil sector | Oil exporting countries | Oil sector | Political economy | Real effective exchange rates

Author's Keyword(s): Panel VAR | natural resources | inter-sectoral linkages | real effective exchange rate
Publication Date: May 01, 2010
Format: Paper
Stock No: WPIEA2010118 Pages: 25
US$18.00 (Academic Rate:
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