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The effect of oil rent on economic development in Saudi Arabia: Comparing the role of globalization and the international geopolitical risk

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  • Sweidan, Osama D.
  • Elbargathi, Khadiga

Abstract

We explored the effect of globalization and international geopolitical risks on Saudi Arabia's economic development via the channel of Saudi's oil rent during the period 1970–2018. In addition, we tested if globalization and international geopolitical risk can strengthen or weaken the impact of oil rent on Saudi Arabia's economic development. A time series autoregressive distributed lag model with moderation effects was used to achieve the paper's objective. Our results revealed that the direct short and long run effects of oil rent and globalization are statistically significant and positive, while the influence of international geopolitical risk is statistically insignificant in the short and long run. However, adding the moderation effects to the analysis reversed the results. The interaction terms of our paper are significant and negative. It implies that the interaction terms deflate the direct positive effects. Therefore, the final effect of oil rent and globalization could be either positive or negative, while the final effect of the international geopolitical risk is negative. The findings from the current paper confirms that globalization effect is dominant on economic development, compared to geopolitical risk. The policy implication of our paper focuses on diversifying Saudi's economy and strengthen Saudi Arabia's institutional framework.

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  • Sweidan, Osama D. & Elbargathi, Khadiga, 2022. "The effect of oil rent on economic development in Saudi Arabia: Comparing the role of globalization and the international geopolitical risk," Resources Policy, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:jrpoli:v:75:y:2022:i:c:s0301420721004773
    DOI: 10.1016/j.resourpol.2021.102469
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    More about this item

    Keywords

    Economic development; Oil rent; Globalization index; Geopolitical risk; ARDL model; The Kingdom of Saudi Arabia;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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