@article{article_1726072, title={COULD INDONESIA BE AT RISK OF DUTCH DISEASE? AN EXAMINATION OF PALM OIL}, journal={Uluslararası İktisadi ve İdari Akademik Araştırmalar Dergisi}, volume={5}, pages={43–68}, year={2025}, author={Dursun, Engin and Kashem, Najibul}, keywords={Endonezya, Hollanda Hastalığı, Palm Yağı, Var Modeli}, abstract={The surge in palm oil production owes to its cost-effectiveness and lack of trans-fatty acids, mirroring a global uptick in consumption across various sectors, including food, non-food industries, and biofuels. Indonesia, as the foremost exporter of this commodity, wields considerable influence over the global palm oil market. However, this dominance raises concerns about the Dutch Disease, a phenomenon explored in economic literature. This study aims to investigate whether palm oil production in Indonesia, through changes in the real exchange rate, has led to the Dutch Disease in the Indonesian economy. The study adopts a model framework originally developed by Kuralbayeva et. al. (2001), which is designed to empirically investigate the Balassa-Samuelson effect. The analysis utilizes monthly data from the period 2009:M01 to 2022:M12, including Indonesia’s real effective exchange rate, terms of trade, palm oil prices, and real wages. By constructing a general VAR model, the study explores the short- and long-term effects of terms of trade, palm oil prices, and real wages on the real effective exchange rate. According to the findings, there is a long-run cointegration among variables. There is Granger causality from real wages to real exchange rate and other variables, and its relationship with terms of trade is not statistically significant. The real exchange rate is less influenced by terms of trade than expected, and although real wages impact it, the evidence is insufficient to confirm Dutch Disease, suggesting balanced sectoral competitiveness and limited effects of palm oil exports.}, number={2}, publisher={Sivas İktisadi ve İdari Akademik Araştırmacılar Derneği}