Asymmetric effects of oil revenue on government expenditure: insights from oil‐exporting developing countries

Abstract

This study was aimed at investigating the asymmetric effect of oil revenue on government expenditures in developing oil‐exporting countries, as most previous studies on the subject had presumed a symmetric oil revenue–government expenditure nexus. Thus, a non‐linear panel ARDL was employed to determine how government expenditures respond to positive and negative shocks to oil revenue. Regression estimates indicated that both total and health government expenditures respond asymmetrically to positive and negative changes in oil revenue in the long run, while the responses are symmetric in the short run. The results bespeak the limitation in modelling long‐run oil revenue–government expenditure nexus models symmetrically and the need to consider asymmetry when modelling the relationship between the two variables. The findings also bring to the fore the need for developing oil‐exporting countries to diversify their economies in order to extend their revenue sources, as such would greatly reduce the susceptibility of government expenditure, especially health expenditure to oil revenue busts. Furthermore, stabilisation funds from oil revenue booms if used and properly managed can help to moderate the negative impact of oil revenue busts in these countries.

The relationship between LNG price, LNG revenue, non-LNG revenue and government spending in China: An empirical analysis based on the ARDL and SVAR model

“…Therefore, the relationship between GOVS and revenue needs to be rationalized in order to promote the increase in the LNG sector revenues and non-LNG sector revenues as well as economic growth. 7,12,27 Overall, LNG revenues and non-LNG revenues are the main predictors of GOVS rather than LNG prices, and the findings substantially align with studies such as. 8,44…”

“…11 Based on the ARDL long-run estimation results we cannot prove that there is a direct relationship between LNG prices and GOVS, which implies that there are some limitations between LNG price fluctuations and GOVS, thus indicating a non-linear relationship between LNG price shocks and GOVS. 7,9,12,27 Overall, GOVS mitigates the direct impact of non-LNG revenue to some extent, and that an appropriate allocation of spending in the non-LNG industry will have a positive impact on the development of the market economy, which to some extent GOVS caused both LNG revenue non-LNG revenue growth supporting the Keynesian and spend-tax hypothesis, and the Nigeria studied by 47 supported this conclusion.…”

“…However, 1 believed that low oil prices will have a serious negative impact on the high-cost unconventional gas industry and economic growth, leading to frequent bankruptcies of unconventional oil and gas companies. On the other hand, energy price shocks can severely affect GOVS, 7,8,10,12,13,27 concluded that lower oil export prices lead to increased GOVS and economic stagnation in developing countries, but less so in developed countries. Though, in this paper, LNG price shocks tend to appreciate the economic growth and GOVS in the short and long-run.…”

“…This paper has examined the relationship between the LNG market, non-LNG market and GOVS in China for the period of January 2007 to March 2021. Large number of studies have been conducted to explore the relationship between energy prices and GOVS (economic growth), 7,9,16,25,27,30,39 but few studies have focused on quantitative studies of the impact of LNG price shocks on GOVS based on the LNG market. 3,6,36,48,49 Based on the existing research gaps, we intend to explore the empirical cointegration, long-run and short-run dynamics between LNG price, LNG revenue, non-LNG revenue and GOVS in China by developing ad-hoc ARDL and SVAR models.…”

“…The study finds that lower oil export prices lead to increased GOVS and economic stagnation in developing countries, but less so in developed countries. Similarly, 27 investigated the asymmetric effect of oil revenue on GOVS in developing oil-exporting countries, and found that GOVS reacted asymmetrically to the positive and negative changes in oil revenues, while the responses are symmetric in the short-run. 10 analyzed the impact of shocks to energy revenue and GOVS on economic growth.…”