The Impact of Oil Prices on the Real Exchange Rate in Twelve Oil Exporting Countries : The Dutch Disease Effect

This study investigated the impact of oil price shocks on the real exchange rate covering the last oil shocks from 2003 to 2009 in 12 oil exporting countries, namely Algeria, Bahrain, Egypt, Indonesia, Kuwait, Nigeria, Oman, Qatar, Saudi Arabia, Sudan, United Arab Emirates, and Venezuela. In this study the panel model was implemented using four variables, namely real exchange rate as a dependent variable, and oil price, government consumption expenditure, and money supply as independent variables. The results we have arrived at show that the Dutch disease does exist in these countries, thus, we recommend the use of the crawling peg exchange rate by the above mentioned countries since this regime helped Indonesia in the period from 1987 to 1994 after they changed their exchange rate to the floating exchange rate to cushion the Dutch disease effect