Oil-Price Boom and Real Exchange Rate Appreciation: Is there Dutch Disease in the Cemac?

IMF Working Papers, November 1, 2011

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Employs a heuristic comparative approach suggested by Ismail (2009) to search for evidence of Dutch disease in oil-rich countries of the Central African Economic and Monetary Community (CEMAC).
Focuses on the 14 member countries that constitute the CFA franc zone to isolate dynamics related to the exchange rate regime.
Separates countries into net oil importers and net oil exporters and analyzes:
- economic growth
- the real exchange rate
- the agricultural and external sectors

While CEMAC countries have benefitted from high international oil prices in recent years, they have also experienced relatively large real exchange rate appreciations.
Based on traditional models:
- Findings are broadly consistent with the presence of Dutch disease in the net oil exporter group during the oil-price boom.
Departures from traditional models:
- Yield mixed results, indicating heterogeneity across countries.
Policy implication from empirical evidence:
- The mixed results suggest the need to employ a case-by-case approach when assessing and addressing Dutch disease risks.

Real exchange rate appreciations in oil-rich CEMAC countries raise concerns about:
- the presence of Dutch disease
- the ability to achieve high growth and employment in the long run

Subject: Commodities, Exchange rate adjustments, Expenditure, Foreign exchange, Oil, Oil production, Production, Real exchange rates
Keywords: appreciation, appreciation result, Dutch disease, effect of an increase, Exchange rate adjustments, government spending, growth, movement effect, natural resource, natural resources, Oil, Oil production, real exchange rate, Real exchange rates, resource, resource curse, resource movement effect, Sub-Saharan Africa, WP