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The asymmetric relationship between oil revenues and economic activities: The case of oil-exporting countries

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  • Mehrara, Mohsen
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    Abstract

    This paper examines the nonlinear or asymmetric relationship between oil revenues and output growth in oil-exporting countries, applying a dynamic panel framework and two different measures of oil shocks. The main results in this paper confirm the stylized facts that in heavily oil-dependent countries lacking the institutional mechanisms de-linking fiscal expenditure from current revenue, oil revenue shocks tend to affect the output in asymmetric and nonlinear ways. The findings suggest that output growth is adversely affected by the negative oil shocks, while oil booms or the positive oil shocks play a limited role in stimulating economic growth. The findings have practical policy implications for decision makers in the area of macroeconomic planning. The use of stabilization and savings funds and diversification of the real sector seems crucial to minimize the harmful effects of oil booms and busts.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 3 (March)
    Pages: 1164-1168

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:3:p:1164-1168

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    Web page: http://www.elsevier.com/locate/enpol

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    11. James D. Hamilton, 2000. "What is an Oil Shock?," NBER Working Papers 7755, National Bureau of Economic Research, Inc.
    12. Javier F. Mory, 1993. "Oil Prices and Economic Activity: Is the Relationship Symmetric?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 151-162.
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    Cited by:
    1. Özlale, Ümit & Pekkurnaz, Didem, 2010. "Oil prices and current account: A structural analysis for the Turkish economy," Energy Policy, Elsevier, vol. 38(8), pages 4489-4496, August.
    2. Iwayemi, Akin & Fowowe, Babajide, 2011. "Impact of oil price shocks on selected macroeconomic variables in Nigeria," Energy Policy, Elsevier, vol. 39(2), pages 603-612, February.
    3. Hamdi, Helmi & Sbia, Rashid, 2013. "Dynamic relationships between oil revenues, government spending and economic growth in an oil-dependent economy," Economic Modelling, Elsevier, vol. 35(C), pages 118-125.
    4. Shirinbakhsh, Shamsollah & Moghaddas Bayat, Maryam, 2011. "An Evaluation of Asymmetric and Symmetric Effects of Oil Exports Shocks on Non-Tradable Sector of Iranian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 106-124, March.

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