Oil, Volatility and Institutions: Cross-Country Evidence From Major Oil Producers - Economic Research Forum (ERF)

Oil, Volatility and Institutions: Cross-Country Evidence From Major Oil Producers

Amany El Anshasy, Kamiar Mohaddes and Jeffrey Nugent


Date:
June, 2017

NO.
1115

Length:
22 pages

Topic:
F4. Macroeconomic Aspects of International Trade and Finance
C2. Single Equation Models
Q3. Nonrenewable Resources and Conservation
E. Macroeconomics and Monetary Economics
O1. Economic Development

This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961—2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such.

ملخص

تبحث هذه الورقة الآثار الطويلة الأجل لإيرادات النفط وتقلباته على النمو الاقتصادي ودور المؤسسات في هذه العلاقة. نقوم بجمع بيانات سنوية وشهرية عن عينة من 17 منتجا رئيسيا للنفط خلال الفترة 1961-2013، ونستخدم نهج التقسيم الموزع للارتداد الذاتي الموزع (أوردل)، بالإضافة إلى نسخته المعززة عبر المقطع للتقدير. ولذلك، وعلى النقيض من الأدبيات السابقة عن لعنة الموارد، نأخذ في الاعتبار جميع السمات الرئيسية الثلاثة للفريق: الديناميات، وعدم التجانس والاعتماد على قطاعات مستعرضة. وتشير نتائجنا إلى ما يلي: (1) أن هناك تأثيرا سلبيا كبيرا لتقلب عائدات النفط على نمو الناتج، (2) أن ارتفاع معدل نمو عائدات النفط يرفع بشكل كبير النمو الاقتصادي، و (3) يمكن للسياسات المالية (المؤسسات) الأفضل أن تعوض بعض الآثار السلبية لتقلب عائدات النفط. ولذلك، فإننا نرى أن التقلب في عائدات النفط، جنبا إلى جنب مع رد فعل الحكومة الضعيف على هذا التقلب، يدفع لمفارقة لعنة الموارد، وليس وفرة عائدات النفط في حد ذاتها

Research Fellows

Amany El Anshasy

Assistant Professor, United Arab Emirates University


Research Fellows

Kamiar Mohaddes

Senior Lecturer, Fellow, and Director of Studies in Economics, Girton College, University of Cambridge, UK


Senior Associates

Jeffrey Nugent

Professor of Economics, University of Southern California


Project

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