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Article

The Symptoms of Illness: Does Israel Suffer from “Dutch Disease”?

1
Department of Economics and Management, The Max Stern Yezreel Valley College, Emek Yezreel 19300, Israel
2
SEED—The Sustainable Economic and Environmental Development Research Center, The Max Stern Yezreel Valley College, Emek Yezreel 19300, Israel
3
NRERC—Natural Resource and Environmental Research Center, University of Haifa, Haifa 31905, Israel
*
Author to whom correspondence should be addressed.
Energies 2019, 12(14), 2752; https://doi.org/10.3390/en12142752
Received: 8 May 2019 / Revised: 1 July 2019 / Accepted: 12 July 2019 / Published: 18 July 2019
(This article belongs to the Special Issue Energy Economics and Policy in Developed Countries)
The natural gas revolution in Israel started about two decades ago. Its numerous social impacts include moving to cleaner energy, improving energy security and the balance of trade, tightening international relations, and increasing tax revenue. However, “Dutch disease” phenomena—where the accelerated export of natural gas leads to the strengthening of the local currency, the subsequent weakening of other exporting industries, and rising unemployment—might suck Israel into the economic slowdown. This study examines whether the strengthening of the New Israeli Shekel (ILS) in recent years is a symptom of “Dutch disease”. It is expected that the large-scale export of natural gas will start in 2021 with the development of the major offshore field “Leviathan”. Notably, ILS has been appreciating for several years already. We employed the event study approach to analyze the fluctuations of the daily ILS/USD real exchange rate in the years 2009–2017, combined with the media announcements related to the gas discoveries published during this period. The results revealed that gas-related news does affect the exchange rate and appreciate ILS. GARCH analysis confirms the results. View Full-Text
Keywords: Dutch disease; natural gas; event study; real exchange rate; announcements; currency appreciation; export; expectations Dutch disease; natural gas; event study; real exchange rate; announcements; currency appreciation; export; expectations
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MDPI and ACS Style

Palatnik, R.R.; Tavor, T.; Voldman, L. The Symptoms of Illness: Does Israel Suffer from “Dutch Disease”? Energies 2019, 12, 2752. https://doi.org/10.3390/en12142752

AMA Style

Palatnik RR, Tavor T, Voldman L. The Symptoms of Illness: Does Israel Suffer from “Dutch Disease”? Energies. 2019; 12(14):2752. https://doi.org/10.3390/en12142752

Chicago/Turabian Style

Palatnik, Ruslana Rachel, Tchai Tavor, and Liran Voldman. 2019. "The Symptoms of Illness: Does Israel Suffer from “Dutch Disease”?" Energies 12, no. 14: 2752. https://doi.org/10.3390/en12142752

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