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Oil prices and fiscal policy in an oil-exporter country: Empirical evidence from Oman

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  • Al Jabri, Salwa
  • Raghavan, Mala
  • Vespignani, Joaquin

Abstract

This paper studies the impact of oil price shocks on fiscal policy and real GDP in Oman using new unexplored data. We find that an oil price shock explains around 22% and 46% of the government revenue and GDP variation, respectively. Decomposing the government revenue and GDP further into petroleum and non-petroleum related components, we find that an oil price shock explains around 26% of the variation in petroleum revenue and 90% of the petroleum-GDP. Though petroleum and non-petroleum GDP respond positively to oil price shocks, government expenditure is not directly affected by oil prices but is affected by government revenue. The results suggest that the Omani government uses its reserve fund and local and international debt to smooth and reduce the impact of oil price fluctuations.

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  • Al Jabri, Salwa & Raghavan, Mala & Vespignani, Joaquin, 2022. "Oil prices and fiscal policy in an oil-exporter country: Empirical evidence from Oman," Energy Economics, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:eneeco:v:111:y:2022:i:c:s0140988322002638
    DOI: 10.1016/j.eneco.2022.106103
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    Cited by:

    1. Victor Pontines & Davaajargal Luvsannyam, 2023. "External Commodity Shocks and the Insulating Role of Fiscal Policy on Real Output: Evidence from a Commodity-Exporting Economy," Working Papers wp51, South East Asian Central Banks (SEACEN) Research and Training Centre.
    2. Ge, Zhenyu, 2023. "The asymmetric impact of oil price shocks on China stock market: Evidence from quantile-on-quantile regression," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 120-125.
    3. Muhamad Nafik Hadi Ryandono & Mochamad Ali Imron & Muhammad Alkirom Wildan, 2022. "World Oil Prices and Exchange Rates on Islamic Banking Risks," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 409-413, July.

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    More about this item

    Keywords

    Oil price shocks; Fiscal policy; GDP; SVAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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