The effect of Dutch disease on sectors: The research of S.Arabia and Iran

The impact of the natural resources discovery and the resulting of increase in export revenues is likely to influence production and foreign trade relations in the traditional sectors, regardless of the previous applied foreign trade strategy in that country. The state of inertia created by resource exploration is defined as the curse of natural resources. The curse of natural resources leads to Dutch disease, rant watch, excessive confidence and neglect of education. The Dutch disease is defined as a mechanism that occurs due to the discovery of natural resources and its exports, which it negatively effects export of other products. However, such example shows that reaching natural resources do not always lead to Dutch diseases. Sudden increases in natural resource prices and huge foreign exchange inflows originating from foreign aid or foreign direct investment can be exemplified. In this study, two rich source countries Iran and Saudi Arabia have been explored in order to determine that may or may not have Dutch disease. In these two countries, Iran's long term war with the revolution and the embargo that faced were investigated to see whether it was a very different dimension, unlike Arabia, which is not restricted to this kind. The analysis period considered between 1980 and 2014 for both countries. In the results of time series analysis, although Iran and Saudi Arabia have Dutch disease, however, the severity of disease in these countries is weak. Keywords: Dutch disease, Economic growth, Time series, ARDL approach