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The model is invalid. The conclusions cannot be made whether the Dutch disease is found or not in UAE. I wanted to test how other factors effect and do not intersect early researchers. I attempted to remove autocorrelation by introducing other variables.
If the United Arab Emirates would be a victim of the disease the decline in exports of the natural resource will result in a decline in the non-oil tradable goods, which will affect the country negatively. Furthermore, the disease can also make it more difficult for the country to deal with the problem of high inflation. Furthermore, the larger increase in the non-tradable sector compared to the tradable sector is also an indication of the disease in the country. According to these findings the authors can conclude that United Arab Emirates has experienced symptoms of the disease, however, it cannot be concluded that it has been a victim of the disease.
List of sources
1.Paul Krugman, The Narrow Moving Band, the Dutch Disease, and the Competitive Consequences of Mrs. Thatcher. Journal of Development Economics 1987
2.Raimundo Soto, Iiham Haouas, Has the UAE escaped the oil course? Working paper series 2012
3.Трегуб И.В. Investment project risk analysis in the modern Russian economy // research in empirical international trade. - Slovenia: working papers. June. 2012.
4. Трегуб И.В. Математические модели динамики экономических систем -монография, М.: 2009.
УДК 519.868
Shantsev A. V. master student of 1st year IFF group 1-2m
Scientific adviser: Tregub I. V., Ph.D. in Technics, Sc.D. in Economics
Professor
Financial University under the Government of the RF
Moscow, Russia Шанцев А.В. студент, магистратура 1 курс, МФФ группа 1-2м Научный руководитель: Трегуб И.В., к.тн., д.э.н., профессор Финансовый университет при Правительстве РФ
Россия, Москва
ECONOMETRIC ANALYSIS OF "DUTCH DISEASE": EVIDENCE FROM AUSTRALIA ЭКОНОМЕТРИЧЕСКИЙ АНАЛИЗ «ГОЛЛАНДСКОЙ БОЛЕЗНИ»: АВСТРАЛИЯ Annotation: During the process of continuous development, countries experience various challenges and problems. Economic problems are one of the
most important and influential among them. "Dutch disease " is a very peculiar situation, which many developing countries have experienced. Australia is not an exception from this rule.
Key words: "Dutch disease", econometrics, analysis, Australia, natural resources, industrial production
Аннотация: В процессе непрерывного развития страны сталкиваются с различными трудностями и проблемами на своем пути. Экономические проблемы являются одними из самых влиятельных среди них. С «Голландской болезнью» сталкивались многие развивающиеся страны. Австралия не исключение из этого правила.
Ключевые слова: "Голландская болезнь", эконометрика, анализ, Австралия, полезные ископаемые, промышленное производство
"Dutch disease" - the negative effect exerted by the strengthening of the real exchange rate of national currency on economic development as a result of the boom in the mining sector[1]. The boom can be caused by the discovery of mineral deposits or increase in prices of the export of extractive industries. This effect got its name after the discovery of the Netherlands' natural gas fields in 1959. The growth of export of gas has led to an increase in inflation and unemployment, a drop in manufacturing exports and income growth in the 70-ies. Rising oil prices in the mid-70s and early 80s. It caused a similar effect in Saudi Arabia, Nigeria and Mexico. Australia also suffered from "Dutch disease" - first the Australian gold rush in the 19th century, then the mining boom of 2000's - 2010's[2]. In this article I will try to check the presence of "Dutch disease" in today's Australia.
The main indicator for any economy is the level of GDP, thus it was taken as a main variable for the model. It was linked to the level of industrial production, level of Broad money in the economy (M3), exchange rate (AUD to USD), oil price, the difference between import and export, consumer price index (inflation level), unemployment, government revenue and export of raw materials. All of these variables seemed to me as vital indicators for "Dutch disease" analysis, as they show financial and economic health of the country, as well as possible impact of raw material prices on budget revenue and consumers.
Unfortunately, consumer price index (inflation level), unemployment, government revenue and export of raw materials had to be excluded from the final model, as they appeared to be mathematically insignificant. The resulting model can be seen below.
Table 1. Eviews system estimation, 2017
System: AUSTRALIA
Estimation Method: Two-Stage Least Squares
Date: 02/15/17 Time: 20:21
Sample: 1980 2015
Included observations: 36
Total system (balanced) observations 72
Coefficient Std. Error t-Statistic Prob.
C( 1) 110.3900 104.8848 1.052489 0.2965
C(2) 9.551756 2.399658 3.980465 0.0002
C(3) 5.926488 1.085710 5.458627 0.0000
C(4) -417.2349 71.53620 -5.832500 0.0000
C(7) -8.506225 2.425356 -3.507207 0.0008
C(8) 0.118032 0.008759 13.47493 0.0000
C(9) -0.368069 0.117268 -3.138691 0.0026
C(10) -0.000311 0.000169 -1.845170 0.0696
Determinant residual covariance 213365.9
Equation: GDP = C(1) + C(2)*IND + C(3)*M3 + C(4)*E Instruments: OIL_PRICE SALDO IND M3 OIL_PRODUCTION GOVREV UNEMP E C EXP_RM
Observations: 36 _
584.9623
441.9583 168838.5
R-squared 0.975303 Mean dependent var Adjusted R-
squared 0.972988 S.D. dependent var
S.E. of regression 72.63747 Sum squared resid
Durbin-Watson stat 0.668036
Equation: M3 = C(7) + C(8)*GDP + C(9)*OIL_PRICE + C(10)*SALDO Instruments: OIL_PRICE SALDO IND M3 OIL_PRODUCTION GOVREV UNEMP E C EXP_RM
Observations: 36 _
45.38043
41.51878 2182.583
R-squared Adjusted R-squared
S.E. of regression Durbin-Watson stat
0.963825 Mean dependent var
0.960433 S.D. dependent var 8.258677 Sum squared resid 0.777664
GDP - bln. USD, industrial production (IND) - index points (2010 - 100), M3 - bln. USD, exchange rate (E) - AUD to USD ratio, oil price - USD, import/export balance (SALDO) - bln. USD.
It can be seen from the table that the trustworthiness of the modes is high, as R2 is greater than 95%. All other tests have been passed except for the Durbin-Watson test. The Durbin-Watson test is a statistical test used to test the first-order autocorrelation of the test sequence elements. It is most often used in the analysis of time series of residues and regression models. In my case the variables in both equations are auto-correlated. Besides, the level of statistical errors is quite high in the main equation.
The derived model suggests that there is negative correlation between GDP and exchange rate, meaning that if Australian dollar depreciates - GDP level falls. This in term means that import has more impact on the economy than export, suggesting that "Dutch disease" is not confirmed.
To sum everything up, it would be fair to assume that the derived model did not work properly, showing the absence of "Dutch disease" in Australia, despite its actual presence and evident effect. The level of statistical error in the first equation and auto-correlation of variables prove this. It is difficult to identify the existence of "Dutch disease" in a given country alone, but deriving the right method and gathering adequate data make the task twice as hard. It seems to me that increasing the number of used variables and taking a greater time span for analysis would increase the truthfulness of the model.
List of literature:
1. Dutch disease. URL:www.thefreedictionary.com/Dutch+disease
2. W. Max Corden. Dutch Disease In Australia: Policy Options For A Three Speed Economy 04.2012, URL:http://www.maxcorden.com/wp-content/uploads/2013/12/Dutch-Disease-in-Australia.-Policy-0ptions-for-a-Three-Speed-Economy-2012.pdf
3. Davis G.A., Tilton J.E. The resource curse, 2005 URL:http://lawweb.colorado.edu/profiles/syllabi/banks/Davis%2520%2520Tilton %2520-%2520The%2520resource%2520curse.pdf
4. Davis G.A. Extractive Economies, Growth, and the Poor 2009 URL:http://www.google.ru/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&ve d=0ahUKEwj4h6_NgLXSAhVhYZoKHfMiBmYQFghYMAk&url=http%3A%2F %2Fwww.springer.com%2Fcda%2Fcontent%2Fdocument%2Fcda_downloaddocu ment%2F9783642011023-c1.pdf%3FSGWID%3D0-0-45-802605-p173897422&usg=AFQjCNHmQiUdugigwXv1XT76U41Cexmn1A&cad=rjt
5. Трегуб А.В., Трегуб И.В. Методика прогнозирования показателей стохастических экономических систем //Вестник Московского государственного университета леса - Лесной вестник. - 2008. - №2 (59). - С. 144-152.
6. Трегуб И.В., Хацуков к.л. Проверка применимости модели для прогнозирования экономических показателей // Экономика и социум. 2014. №2 4-4 (13). С. 1345-1349.
УДК 338.1
Sheveleva E. S. Bachelor of Economics first-year master student of International Finance Faculty Financial University under the Government of The Russian Federation
Moscow, Russia Research supervisor: Tregub I. V., PhD ECONOMIC GROWTH AND FINANCIAL SECTOR DEVELOPMENT INTERRELATIONS: THE UK EXAMPLE Abstract. The article is devoted to the investigation on the existing interrelations between financial and economic development. On the example of the UK, that from of old has a strong and advancedfinancial services sector challenged
