THE IMPACT OF FLUCTUATION OF OIL REVENUE ON REAL EXCHANGE RATE AND THE STRUCTURAL IMBALANCES OF IRAQI ECONOMY (DURING THE PERIOD 1997–2016)

Abstract

This thesis analyses the extent to which a boom in a particular export commodity sector (i.e., oil) affects the real exchange rate and competitiveness in the rest of the economy: This problem has been analyzed in the early stage by Corden and Neary (1982) with the so-called ‘Dutch-disease’. As a result, the booming sector (oil sector) the country’s currency appreciates, thereby reducing the competitiveness of the country’s traditional export sector in the international market. This thesis examines whether Dutch Disease is present in Iraq in the light of having not study about Dutch Disease phenomena. It evaluates the impact of growing oil revenues on non-oil sectors of the Iraqi economy. It produces some empirical evidence for the explanation nontradable goods and contraction of the tradable goods sector due to the booming oil sector and appreciating real exchange rate and made tradable goods sector become uncompetitive for export. The main findings from this thesis that the Iraqi economy was subject to have the Dutch disease phenomena during the boom. Some of the indications of the disease, remarkably the increase of relative prices, the real exchange rate appreciation, contraction tradable goods sector and expansion of nontraded goods output were applicable. The study uses annual time series data sourced from home and international agencies from 1997 to 2016. Finally, The dissertation discusses briefly some policy measures that will help avoid the issue of appreciation real exchange rate and changing the structure of economy out of tradable goods to non-tradable goods sector.