The Role of Regulatory Quality in Optimizing the Impact of Oil Revenues on Economic Growth Process

This study investigates the role of Regulatory Quality in the impact of oil revenues on economic growth for the countries of the Persian Gulf including Iran by applying a PSTR model from 2000 to 2023. Various studies on the relationship between oil revenues and economic growth have yielded mixed results, with few examining country-specific conditions, such as regulatory quality, in this context. In most of them, the non- linear relationships have not been considered. Thus, this paper examines the nonlinear association between oil revenues and economic growth. For this purpose, the paper uses the regulatory quality index, GDP growth, oil revenues, employment rate, size of government and capital formation. The results of model estimation reject the linearity hypothesis. Considering a transfer function with a threshold limit that represents a dual model is enough to define the nonlinear relationship between the studied variables and the quality of regulation considered as the transfer variable. The results show that the increase of oil revenues has a negative effect in the first regime and in the second regime has a positive effect on economic growth. It means that in a society with high quality of regulatory, increasing the oil revenues can improve economic growth. capital formation has a positive effect in both regimes. Employment rate has a negative effect in first regime and positive on the second one. the size of government has a negative effect on economic growth in both regimes.