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The long-run relationship between savings and investment in oil-exporting developing countries: a case study of the Gulf Arab states

Author

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  • Syed Abul Basher
  • Stefano Fachin

Abstract

The relationship between national saving and investment over the long term is examined for six Gulf Arab oil-exporting developing countries -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. We show that, provided some large outliers are properly accounted for, long-run equilibrium relationships between saving and investment (both total and fixed) exist in these countries. Since these countries have typically large current account surpluses such relationships cannot be explained by standard arguments. Our hypothesis is that the response of investment to saving largely depends on domestic absorptive capacity.
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Suggested Citation

  • Syed Abul Basher & Stefano Fachin, 2013. "The long-run relationship between savings and investment in oil-exporting developing countries: a case study of the Gulf Arab states," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 37(4), pages 429-446, December.
    • Handle: RePEc:bla:opecrv:v:37:y:2013:i:4:p:429-446
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    File URL: http://hdl.handle.net/10.1111/opec.12006
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    Cited by:

    1. Allegret, Jean-Pierre & Couharde, Cécile & Coulibaly, Dramane & Mignon, Valérie, 2014. "Current accounts and oil price fluctuations in oil-exporting countries: The role of financial development," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 185-201.
    2. Vasudeva N.R. Murthy & Natalya Ketenci, 2021. "The Feldstein–Horioka hypothesis for African countries: Evidence from recent panel error‐correction modelling," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5762-5774, October.
    3. Gnimassoun, Blaise & Joëts, Marc & Razafindrabe, Tovonony, 2017. "On the link between current account and oil price fluctuations in diversified economies: The case of Canada," International Economics, Elsevier, vol. 152(C), pages 63-78.
    4. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2017. "The impact of oil-market shocks on stock returns in major oil-exporting countries: A Markov-switching approach," MPRA Paper 81638, University Library of Munich, Germany.
    5. Ari, Ibrahim & Akkas, Erhan & Asutay, Mehmet & Koç, Muammer, 2019. "Public and private investment in the hydrocarbon-based rentier economies: A case study for the GCC countries," Resources Policy, Elsevier, vol. 62(C), pages 165-175.
    6. Hassan B. Ghassan & Hassan R. Alhajhoj, 2016. "Long-Run Dynamic Relationship between FDI and Domestic Investment in GCC Countries," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 59(2), pages 16-43.
    7. Balsalobre-Lorente, Daniel & Bekun, Festus Victor & Etokakpan, Mfonobong Udom & Driha, Oana M., 2019. "A road to enhancements in natural gas use in Iran: A multivariate modelling approach," Resources Policy, Elsevier, vol. 64(C).
    8. Blaise Gnimassoun & Marc Joëts & Tovonony Razafindrabe, 2016. "On the link between current account and oil price fluctuations in diversified economies: The case of Canada," Working Papers hal-04141574, HAL.
    9. Ghassan, Hassan B. & Alhajhoj, Hassan R., 2012. "Long Run Relationship between IFDI and Domestic Investment in GCC Countries," MPRA Paper 62544, University Library of Munich, Germany, revised Jul 2013.
    10. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2018. "The impact of oil-market shocks on stock returns in major oil-exporting countries," Journal of International Money and Finance, Elsevier, vol. 86(C), pages 264-280.
    11. Covi, Giovanni, 2014. "The First Oil Shock, Stylized Facts, Reflections and The Easterly Puzzle in a Forty-Year Retrospective," MPRA Paper 58130, University Library of Munich, Germany.
    12. Christian Dreger & Teymur Rahmani, 2016. "The impact of oil revenues on the Iranian economy and the Gulf states," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 40(1), pages 36-49, March.
    13. Nenubari John Ikue & Lamin Mohammed Magaji & Samuel Zeb-Omoni & Mohammed, Aminu Usman & Joseph Osaro Denwi, 2021. "Trade Balance and Oil Shocks in African Oil Exporting Countries: A Panel Threshold Regression," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(4), pages 150-166, October.

    More about this item

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • 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
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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