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Relationship Between Oil Revenues and Gross Domestic Product of Oman: An Empirical Investigation

Author

Listed:
  • Neelufer Aslam

    (Department of Management, Waljat College of Applied Sciences, Muscat, Oman,)

  • Swati Shastri

    (Department of Economics, Banasthali Vidyapith, Rajasthan, India.)

Abstract

Oil revenues are a significant contributor to Oman's total revenues. This study empirically examines the long run and short run causal relationship between oil revenues, Real GDP and Real GDP from petroleum activities of Oman from 1985 to 2017. The Johansen Cointegration test and Vector Error Correction Model are used to investigate the cointegrating, long run, and short run relationship. Direction of short run causality is examined through the Wald coefficient restriction test, VEC Granger/Block Exogeneity Test and pairwise Granger causality test. Results show that a statistically significant long run relationship exists between oil revenues, GDP and GDP from petroleum activities. In the short run, however, a weak significant relation exists between GDP and real oil revenues. Variance Decomposition of Forecast error of GDP shows that 48% of variation in GDP can be explained by oil revenues. Through Impulse Responses Function results, it is concluded that initially there is a sharp rise in oil revenues after which oil revenues tend to fall.

Suggested Citation

  • Neelufer Aslam & Swati Shastri, 2019. "Relationship Between Oil Revenues and Gross Domestic Product of Oman: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 195-201.
    • Handle: RePEc:eco:journ1:2019-06-24
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    References listed on IDEAS

    as
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    3. Aliyu, Shehu Usman Rano, 2009. "Oil Price Shocks and the Macroeconomy of Nigeria: A Non-linear Approach," MPRA Paper 18726, University Library of Munich, Germany, revised 16 Nov 2009.
    4. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Real Oil Revenues; Real GDP; VECM;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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