Resource curse in oil exporting countries

This paper provides a comprehensive analysis of the “resource curse” phenomenon, i.e. the negative impact of oil abundance on long-term economic growth, for a set of oil exporting countries. It distinguishes between two potential drivers of resource courses: oil dependence and oil price volatility, and it investigates whether the resource curse depends on a country’s institutional and macroeconomic environment. The empirical analysis relies on a panel of 24 oil exporters between 1982 and 2012 and an error correction model. The paper provides robust evidence in favour of the resource curse hypothesis, and there is no evidence that higher quality institutions could mitigate the curse. Oil price shocks appear to have an asymmetric impact in the short run: the growth effect is positive when oil prices rise, while no statistically significant effect is observed when they fall. There is also indirect evidence that the impact of an oil price shock is partly offset by fiscal policies, particularly in countries with high oil dependence. In the long run, oil price volatility does not appear to have a statistically significant impact on GDP. Finally, exchange rate regimes seem to play a role: countries allowing their currencies to float seem to gain from positive oil price shocks in the short run, but in the long run a fixed exchange rate regime is associated with higher GDP, probably owing to active stabilisation by sovereign wealth funds.