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Impact of petroleum and non-petroleum indices on financial development in Oman

Author

Listed:
  • Faris Nasif Alshubiri

    (Dhofar University)

  • Omar Ikbal Tawfik

    (Dhofar University)

  • Syed Ahsan Jamil

    (Dhofar University)

Abstract

This study analyzes the impact of petroleum and non-petroleum indices on the financial development of the Sultanate of Oman from 1978 to 2017. To this end, it uses the petroleum proxy of oil rents (% of gross domestic product, GDP) and the non-petroleum proxy of industry (including construction) value added (% of GDP); agriculture, forestry, and fishing value added (% of GDP); and services value added (% of GDP) to determine the effect on financial development, measured by the amount of domestic credit extended to the private sector by banks (% of GDP). It applies an autoregressive distributed lag (ARDL) model. The long-term equation illustrates that the agriculture and industry GDPs have a negative and significant relationship with domestic credit in Oman. However, the oil and service sector GDPs promote financial development. The short-term equation illustrates that the oil, agricultural, and service sectors have positive and significant effects on domestic credit. The conclusion is that the economy of Oman is still in the first phase of economic diversification. Accordingly, the government should use oil revenues to develop various non-oil industrial sectors. This would enhance the country’s competitiveness in the global economy and positively contribute to improving the liquidity of the banking sector for stimulating credit at the macroeconomic level.

Suggested Citation

  • Faris Nasif Alshubiri & Omar Ikbal Tawfik & Syed Ahsan Jamil, 2020. "Impact of petroleum and non-petroleum indices on financial development in Oman," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-22, December.
    • Handle: RePEc:spr:fininn:v:6:y:2020:i:1:d:10.1186_s40854-020-00180-7
    DOI: 10.1186/s40854-020-00180-7
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    2. S. Yu. Babenkova, 2023. "Development of Oman’s largest non–oil sectors: financial system of the Sultanate," Entrepreneur’s Guide, JSC “Publishing Agency “Science and Educationâ€, vol. 16(3).
    3. Wei Li & Serhat Yüksel & Hasan Dinçer, 2022. "Understanding the financial innovation priorities for renewable energy investors via QFD-based picture fuzzy and rough numbers," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-30, December.

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    More about this item

    Keywords

    Petroleum index; Non-petroleum index; Financial development; ARDL model; Oman;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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