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Sensitivity of Fiscal Balances to Oil Price Shocks: Short and Long Term Effects in the Context of Oman

Author

Listed:
  • Omer Ali Ibrahim

    (College of Banking and Financial Studies, Oman)

  • Sonal Devesh

    (College of Banking and Financial Studies, Oman)

  • Hisham Mohamed Hassan

    (College of Banking and Financial Studies, Oman)

Abstract

This paper examines the fiscal balances in Oman and their sensitivity to oil price shocks in the short and long term, using annual data for the period 1980 2016, and employing the vector auto regression model. Results of the study indicated that oil prices Granger cause gross domestic product (GDP) growth, capital formation and inflation. Impulse response analysis showed that an innovation in the oil prices and consequent oil revenues have a similar effect on most of the macroeconomic variables in Oman. Most of these variables show an increase in the first four quarters except for government expenditure and inflation. However, in many cases, this increase has quickly shifted to decrease over the successive quarters except for inflation, which showed a steady increase over time. Variance decomposition analysis, on the other hand, indicated that net oil price shock appears to be a key factor contributing to the volatility of GDP growth over time in Oman.

Suggested Citation

  • Omer Ali Ibrahim & Sonal Devesh & Hisham Mohamed Hassan, 2019. "Sensitivity of Fiscal Balances to Oil Price Shocks: Short and Long Term Effects in the Context of Oman," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 146-155.
    • Handle: RePEc:eco:journ2:2019-02-17
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    References listed on IDEAS

    as
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    Cited by:

    1. Abubakar, Attahir Babaji & Muhammad, Mansur & Mensah, Samuel, 2023. "Response of fiscal efforts to oil price dynamics," Resources Policy, Elsevier, vol. 81(C).
    2. Bulat Mukhamediyev & Zhansaya Temerbulatova, 2019. "The Impact of Oil Prices on the Global Competitiveness of National Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 45-50.
    3. Ebi, Bassey Okon & Aladejare, Samson Adeniyi, 2022. "Oil Price Transmission, Deficit Financing and Capital Formation," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(1), pages 123-133.
    4. Sugra Humbatova, 2023. "The Impact of Oil Prices on State Budget Income and Expenses: Case of Azerbaijan," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 189-212, January.

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    More about this item

    Keywords

    Fiscal Balances; Oil Price Shocks; Oman;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • 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
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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