Unveiling the symptoms of Dutch disease: A comparative and sustainable analysis of two oil-rich countries

Abstract

This work examines and compares the performance of two oil-rich countries (Norway and Algeria) towards sustainable development amidst dutch disease. Norway and Algeria are both among the top oil exporting countries with same characteristics in terms of oil richness but differs in historical economic operations and development. Norway is among the best performing economies in the world while Algeria is still behind in economic operations and development. Comparing the two economies will form a basis for policy recommendation for the less performing oil exporting economies especially the ones in the category of Algeria. Two times series models were adopted for the two countries in separate form for effective comparison of the economies with the findings of the individual analysis. Quarterly data of 1999Q1-2018Q4 and 1999Q1- 2019Q4 were applied for Algeria and Norway analysis respectively. Autoregressive Distributed Lag (ARDL) dynamics and bound with granger causlity approaches were applied for the in-depth analysis of this study. Findings from the ARDL dynamic and long run cointegration established symptoms of Dutch diseases for both countries with economic growth (GDP), government spending (GGFCE), crude oil price and real exchange rate having negative relationship with agriculture (for Algerian model) and manufacturing sector (for Norwegian model) respectively. Again, FDI is confirmed having significantly positive relationship with agriculture and manufacturing sector for Algeria and Norway respectively. Also, findings from granger causality established nexus among the Dutch disease variables especially from the bi-directional interactions between the variables, and hence, attests to the findings of Dutch disease symptoms from the long run cointegration for both economies.