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The Impact of Oil Shocks on Qatar’s GDP

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  • Al-mulali, Usama
  • Che Sab, Che Normee

Abstract

This study examines the impact of oil shocks on Qatar’s gross domestic product using time series data from the period 1970-2007 covering all the oil shocks. The Johansen-Juselius (JJ) cointegration test and VECM Granger causality test are employed in this study. From the results we concluded that oil price has a positive effect on Qatar’s gross domestic product, but at the expense of higher inflation. Qatar seems to have suffered from financial surpluses and rapid economic growth caused by sharp increases in the oil price. At the same time, with a fixed exchange regime and tight monetary policy to deal with these events, this has caused the price of assets to increase sharply, leading to high levels of inflation in Qatar. Based on the results, we recommend that the Qatari currency (riyal) be pegged to a basket of currencies so as to increase the role of monetary policy to deal with the external shocks (oil shocks).

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27822.

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Date of creation: 24 Oct 2010
Date of revision: 31 Dec 2010
Handle: RePEc:pra:mprapa:27822

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Keywords: Qatar; Oil Shocks; GDP; VAR model;

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