Asymmetric Impacts of Oil Price Shocks on Government Expenditures: Evidence from Saudi Arabia

Abdel-Latif, Hany; Osman, Rehab; Ahmed, Heba

doi:10.2139/ssrn.3093721

Cited by 8 publications

(21 citation statements)

References 11 publications

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“…Lastly, by investigating the oil price shocks–government expenditures nexus in Saudi Arabia with quarterly data from 1990 to 2017, Abdel‐Latif et al . (2018) used a non‐linear ARDL technique and found the link between the two variables to be asymmetric in nature, whereby the nature of impacts from positive and negative oil price shocks on government expenditures differs from each other in the long run.…”

Section: Literature Reviewmentioning

confidence: 99%

“…One notable feature of all these studies is that they were all conducted on developed (and mostly, oil‐importing) economies. Oil‐exporting developing countries started receiving attention on the subject only recently with results from most of the studies being inconclusive (Eltony and Al‐Awadi, 2001; Olomola and Adejumo, 2006; Berument and Ceylan, 2007; Mehrara, 2008; Farzanega and Markwardt, 2009; Iwayemi and Fowowe, 2011; Emami and Adibpour, 2012; Abdel‐Latif et al, 2018), whereas considering the central role played by the oil sector in a typical oil‐exporting developing economy as the main source of foreign exchange earnings, oil price volatility could foment a major disruption in economic activities in the economies.…”

Section: Introductionmentioning

confidence: 99%

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

Hassan

2021

OPEC Energy Review

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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.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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

Hassan

2021

OPEC Energy Review

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“…The positivity and negativity of oil prices can be seen in the economy of oil-exporting countries (Alsamara et al, 2017;Ghalayini, 2011. Education public spending avenue is highly and negatively governed while another public spending negatively and negligibly governed by the oil prices (Abdel-Latif et al, 2018). This implies that the Saudi Arabian government is much concerned about the spending on PSA especially on education, and moderately on another public spending irrespective of lowering of oil prices.…”

Section: Discussionmentioning

confidence: 99%

“…There is a need to get the comparative sensitivity and trend of the OP, GDP, and PSA and consider the under and over-allocation of the funds towards the PSA and identify the alternative sources of income to hedge the economy from the shocks of OP. Abdel-Latif et al (2018) studied OP shocks on health and education and found a curvilinear relationship. The negative deviations in the OP significantly and positively correlated with government spending compared to positive deviations.…”

Section: Introductionmentioning

confidence: 99%

Do Oil Prices Govern GDP and Public Spending Avenues in Saudi Arabia? Sensitivity and Trend Analysis

Anis

2021

IJEEP

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The oil revenue constitutes 50% of the GDP of Saudi Arabia approximately and indirectly governs the Public spending Avenues (PSA). The study finds out the symmetry in sensitivity and trend of Oil prices (OP), GDP, and Public Spending Avenues (PSA) and the impact of volatility of oil prices on the GDP, and PSA. The analysis is based on the Chain based Index (CBI) and Fixed Based Index (FBI) numbers to get the sensitivity and trend movement of the variables. Coefficient of variations (CV), ANOVA (Analysis of Variance), and correlation computed to get normality, similarity, and the casual relationship of the variables. OP governs the GDP positively and proportionately while there is a negative correlation between the OP variations and the PSA. Saudi Arabian government enhances its spending on PSA and especially on education irrespective of the lowering of OP year by year. OP and GDP do not govern the movement trend of PSA in the long term while shocks of OP and GDP yearly affect the PSA of Saudi Arabia. There is a need to diversify the income resources to minimize the dependency on OP and hedging the budget deficit from the volatility of OP by considering the impact of the sensitivity of OP on the economy and PSA. The policymakers must consider the sensitivity, trend, and governance of GDP and PSA by the OP to formulate the appropriate policies to shift oil economy to non-oil economy to minimize the impact of shocks of OP on the economy.

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“…Also, the causality test explores the bi-directional relations between government expenditure and revenues in Saudi Arabia. Abdel-Latif et al (2018) studied the impact of oil prices on government expenditures in Saudi Arabia and found that oil prices deviations affect health and education, directly.…”

Section: Literature Reviewmentioning

confidence: 99%

Volatility of Oil Prices and Public Spending in Saudi Arabia: Sensitivity and Trend Analysis

Anis

2020

IJEEP

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The export of petroleum products is the base avenue and constitutes a major ingredient of the Saudi economy. It is evident that the oil prices gradually decrease year by year governed by some international uncontrollable factors. The study is based on the secondary data obtained from the website of the Saudi Arabian Monetary Authority (SAMA). The study applies the Co-efficient of variation (CV), chain based (I CB ) and fixed based (I FB ) index numbers, correlation, and line diagram to get variability, movement, co-movement, and sensitivity and trends of the oil prices and dependent public spending avenues. The study reveals that the Saudi government enhances the level of their public spending while the oil prices lowering year by year. There is low positive sensitivity between oil prices and public spending while a negative trend between oil prices and public spending in long run. The shocks of the oil prices affect the public spending maintaining a certain gap between the growth's trends between of public spending and oil prices progressive order in long run. The trend reveals that the Saudi government basically focuses on education, health, and other community and social services while least on social security & welfare, and housing and community amenities services.

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Asymmetric Impacts of Oil Price Shocks on Government Expenditures: Evidence from Saudi Arabia

Cited by 8 publications

References 11 publications

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

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

Do Oil Prices Govern GDP and Public Spending Avenues in Saudi Arabia? Sensitivity and Trend Analysis

Volatility of Oil Prices and Public Spending in Saudi Arabia: Sensitivity and Trend Analysis

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