The static and dynamic effects of oil rent on competitiveness: Application to the case of Saudi Arabia during the period 1970–2022

Hussain Mohammed Alobaid, Issaoui Fakhri

Article ID: 4598
Vol 8, Issue 5, 2024

VIEWS - 236 (Abstract) 122 (PDF)

Abstract


In this paper, we explore the static and dynamic effects of oil rent on competitiveness in Saudi Arabia’s economy during the period 1970–2022. In addition, we examined the short-run, strong and long-run relationships between exports and industry, inflation, energy use (oil rents) and agriculture using the Autoregressive Distributed Lag (ARDL) approach developed. The analysis showed that government spending will contribute to enhancing the competitive environment with a difference of one year. Moreover, the industry will contribute to increasing competitiveness for a positive relationship in the long term. The results stated that there is an insignificant relationship between competitiveness, inflation, and oil rents. The analysis also shows that inflation has a negative impact with statistical significance in the short term. In addition, the error correction model (ECM) coefficient is negative and has statistical significance at 0.76 at a 1% significant level, which indicates the existence of an error correction mechanism and thus the existence of a long-term relationship between the variables.


Keywords


oil rent, competitiveness; Saudi Arabia

Full Text:

PDF


References


Akadiri, S.S., Eluwole, K.K., Akadiri, A.C., et al. (2020). Does causality between geopolitical risk, tourism and economic growth matter? Evidence from Turkey. Journal of Hospitality and Tourism Management, 43, 273-277. https://doi.org/10.1016/j. jhtm.2019.09.002

Al Rasasi, M. H., H. Qualls, J., & K. Algamdi, B. (2019). Oil Revenues and Economic Growth in Saudi Arabia. International Journal of Economics and Financial Research, 53, 49–55. Internet Archive. https://doi.org/10.32861/ijefr.53.49.55

Al-Khodiry, A. (2012). The Economic and Monetary Union of the Gulf Cooperation Council. Journal of World Trade, 46(Issue 1), 121–154. https://doi.org/10.54648/trad2012005

Álvarez, I., Marín, R., & Maldonado, G. (2009). Internal and external factors of competitiveness in the middle-income countries. Competitiveness and its relationships with productivity and sustainable development. Available online: https://core.ac.uk/download/pdf/6259604.pdf

Bajwa, Ahmad, I., Elahi, A., Rafi, W., et al. (2019). Oil Overdependence and Dutch Disease, KSA Evidence. Management Studies and Economic Systems, 4(3), 213–223. https://doi.org/10.12816/0054688

Baltagi, B. H., Demetriades, P. O., & Law, S.-H. (2007). Financial Development, Openness and Institutions: Evidence from Panel Data. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1026323

British Petroleum (2021). Annual report December 2021. https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-annual-report-and-form-20f-2021.pdf

Colton, N. (2011). Social Stratification in the Gulf Cooperation Council States. The London School of Economics and Political Science, London, UK: LSE Library.

Dickey, D. A., & Fuller, W. A. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49(4), 1057. https://doi.org/10.2307/1912517

Dogan, E., Majeed, M. T., & Luni, T. (2021). Analyzing the impacts of geopolitical risk and economic uncertainty on natural resources rents. Resources Policy, 72, 102056. https://doi.org/10.1016/j.resourpol.2021.102056

Fagerberg, J. (1996). Technology and competitiveness. Oxford Review of Economic Policy, 12(3), 39–51. https://doi.org/10.1093/oxrep/12.3.39

Gylfason, T., & Zoega, G. (2006). Natural Resources and Economic Growth: The Role of Investment. The World Economy, 29(8), 1091–1115. Portico. https://doi.org/10.1111/j.1467-9701.2006.00807.x

Hasanov, F. J., & Razek, N. (2023). Oil and Non-Oil Determinants of Saudi Arabia’s International Competitiveness: Historical Analysis and Policy Simulations. Sustainability, 15(11), 9011. https://doi.org/10.3390/su15119011

Helleiner, E. (2008). Political determinants of international currencies: What future for the US dollar? Review of International Political Economy, 15(3), 354–378. https://doi.org/10.1080/09692290801928731

Hertog, S. (2011). Princes, Brokers, and Bureaucrats. https://doi.org/10.7591/9780801458774

Innis, H. A. (1967). The Importance of Staple Products. Approaches to Canadian Economic History, 16–19. https://doi.org/10.1515/9780773591240-003

Issaoui, F., Boufateh, T., & Montasser, G. E. (2013). The long run dynamic of the Dutch disease phenomenon: a SVAR approach. International Journal of Computational Economics and Econometrics, 3(1-2), 43-63.

Kubursi, A. A. (1987). Oil, Industrialization and Development in the Arab Gulf States. International Journal of Middle East Studies, 19(3), 144.

Mackintosh, W. A. (1923). Economic Factors in Canadian History. Canadian Historical Review, 4(1), 12–25. https://doi.org/10.3138/chr-04-01-02

Mukhamediyev, B., & Temerbulatova, Z. (2019). THE IMPACT OF OIL PRICES ON THE GLOBAL COMPETITIVENESS OF NATIONAL ECONOMIES. International Journal of Energy Economics and Policy, 9(6), 45–50. https://doi.org/10.32479/ijeep.8089

Pesaran, M. H. and Shin, Y. (1999). An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis, In: Strom, S., Holly, A., Diamond, P. (editors), Centennial Volume of Rangar Frisch. Cambridge University Press, Cambridge.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. Portico. https://doi.org/10.1002/jae.616

Phillips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346. https://doi.org/10.1093/biomet/75.2.335

Qudah, A.A., Badawi, A. and E., M. A. (2016). The impact of oil sector on the global competitiveness of GCC countries: panel data approach. Research Journal of Finance and Accounting, 7(20), 32-39.

Ramey, G., & Ramey, V. (1994). Cross-Country Evidence on the Link Between Volatility and Growth. National Bureau of Economic Research. https://doi.org/10.3386/w4959

Roessner, J. D., Porter, A. L., Newman, N., et al. (1996). Anticipating the future high-tech competitiveness of nations: Indicators for twenty-eight countries. Technological Forecasting and Social Change, 51(2), 133-149. https://doi.org/10.1016/0040-1625(95)00195-6

Sachs, J., & Warner, A. (1995). Natural Resource Abundance and Economic Growth. National Bureau of Economic Research. https://doi.org/10.3386/w5398

Sachs, J., & Warner, A. (1997). Natural Resources and Economic Growth. Cambridge,MA (mimeo): HIID

Sid-Ahmed, A. (1998). Economics of Industrialization from Natural Resources. Geneva: Piblisud.

Silke, D. (2011). Tracking the future: Top trends that will shape South Africa and the world. Cape Town: Tafelberg Publishers Ltd.

Stocker, M., Baffes, J., Some, Y. M., et al. (2018). The 2014–16 Oil Price Collapse in Retrospect: Sources and Implications. World Bank, Washington, DC. https://doi.org/10.1596/1813-9450-8419

Sweidan, O. D. (2021). The geopolitical risk effect on the US renewable energy deployment. Journal of Cleaner Production, 293, 126189. https://doi.org/10.1016/j.jclepro.2021.126189

Wysokińska, Z. (2003). Competitiveness and its relationships with productivity and sustainable development. Fibres and Textiles in Eastern Europe, 11(3), 11-14.




DOI: https://doi.org/10.24294/jipd.v8i5.4598

Refbacks

  • There are currently no refbacks.


Copyright (c) 2024 Hussain Mohammed Alobaid, Issaoui Fakhri

License URL: https://creativecommons.org/licenses/by/4.0/

This site is licensed under a Creative Commons Attribution 4.0 International License.