Basher, Syed Abul (2010): Has the non-oil sector decoupled from oil sector? A case study of Gulf Cooperation Council Countries.
Download (251kB) | Preview
As oil and gas are exhaustible resources, the need for economic diversification has gained momentum in the Gulf Cooperation Council (GCC) countries immediately after the end of the first oil boom in 1973-74. Economic diversification, in the context of GCC countries, implies development of the non-oil sector and reduction of the proportion of government revenue and export proceeds from the oil and gas sector. Applying newly developed measures of business cycle synchronicity between oil and non-oil sectors in three GCC economies (Kuwait, Qatar and Saudi Arabia), we show both the degree of diversification achieved so far and the direction of diversification in terms of individual non-oil sectors. Overall, Kuwait and Saudi Arabia appear to be moderately ahead than Qatar in reducing their dependence on oil. Nevertheless, by developing large production capacities of natural gas, Qatar has recently reduced its dependence on oil in favor of natural gas. A quantitative assessment of the determinants of business cycle synchronization is also provided.
|Item Type:||MPRA Paper|
|Original Title:||Has the non-oil sector decoupled from oil sector? A case study of Gulf Cooperation Council Countries|
|Keywords:||Business cycle; Synchronization; Oil price; Fiscal policy; GCC countries|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General
|Depositing User:||Syed Basher|
|Date Deposited:||03. Mar 2010 18:40|
|Last Modified:||13. Feb 2013 05:15|
Al-Muharrami, S., Matthews, K. and Khabari, Y. (2006). Market structure and competitive conditions in the Arab GCC banking system, Journal of Banking & Finance 30, 3487-3501.
Balassone, F. and Kumar, M.S. (2007). Cyclicality of fiscal policy, in Promoting Fiscal Discipline, ed. by Kumar and Ter-Minassian (Washington: International Monetary Fund).
Barnett, S. and Ossowski, R. (2002). Operational aspects of fiscal policy in oil-producing countries, IMF Working Paper 02/177 (Washington: International Monetary Fund).
Beck, R. and Fidora, M. (2008). The impact of sovereign wealth funds on global financial markets, ECB Occasional Paper Series No. 91, June (Frankfurt: European Central Bank).
Camacho, M., Perez-Quiros, G. and Saiz, L. (2006). Are European business cycles close enough to be just one? Journal of Economics Dynamics and Control 30, 1687-1706.
Cashin, P., Liang, H. and McDermott, J. (1999). How persistent are shocks to world commodity prices, IMF Working Paper 99/80 (Washington: International Monetary Fund).
Chand, S.K. (1992). Fiscal impulses and their ¯scal impact, IMF Working Paper 92/38 (Washington: International Monetary Fund).
Chirullo, M. and Guerrieri, P. (2002). GCC-EU relations and trade integration patterns, European University Institute Policy Paper 02/5. http://www.eui.eu/RSCAS/WP-Texts/02 05p.pdf (last visited September 16, 2009).
David, P. (2009). Walking from its sleep: A special report on the Arab world, The Economist, July 25, 2009.
De Haan, J., Inklaar, R. and Jong-a-Pin, R.M. (2007). Will business cycles in the euro area converge? A critical survey of empirical research, Journal of Economic Surveys 22, 234-273.
Dunning, T. (2005). Resource dependence, economic performance, and political stability, Journal of Con°ict Resolution 49, 451-482.
El-Erian, M.A. (1997). Accumulation for future generations: Kuwait's economic challenges, in Kuwait: From Reconstruction to Accumulation for Future Generation, by Chalk, N.A., El-Erian, M.A., Fennell, S.J., Kireyev, A.P. and Wilson, J.F. IMF Occasional Paper No. 150, (Washington: International Monetary Fund).
ESCWA (Economic and Social Commission for Western Asia), (2001). Economic diversification in the oil-producing countries: The case of the Gulf cooperation council economies (New York: United Nations).
Fasano, U. and Iqbal, Z. (2003). GCC countries: From oil dependence to diversification, IMF External Relations Department material (Washington: International Monetary Fund).
Fennell, S.J. (1997). Budget structure and implications for fiscal policy, in Kuwait: From Reconstruction to Accumulation for Future Generation, by Chalk, N.A., El-Erian, M.A., Fennell, S.J., Kireyev, A.P. and Wilson, J.F. IMF Occasional Paper No. 150, (Washington: International Monetary Fund).
Heller, P.S., Hass, R.D. and Mansur, A. (1986). A review of the fiscal impulse measures, IMF Occasional Paper No. 44, (Washington: International Monetary Fund).
Hodrick, R.J. and Prescott, E.C. (1997). Postwar U.S. business cycles: An empirical investigation, Journal of Money, Credit, and Banking 29, 1-16.
Husain, A.M., Tazhibayeva, K. and Ter-Martirosyan, A. (2008). Fiscal policy and economic cycles in oil-exporting countries, IMF Working Paper 08/253 (Washington: International Monetary Fund).
International Monetary Fund (IMF). (2009). Qatar: 2008 Article IV Consultation. IMF Country Report No. 09/28. Institute of International Finance (IIF). (2008). Country report: Qatar. September.
Kose, A., Otrok, C. and Prasad, E. (2008). Global business cycles: Convergence or decoupling?, NBER Working Paper 14292.
Lane, P. and Tornell, A. (1999). The voracity effect, American Economic Review 89, 22-46.
Malaeb, M. (2006). Diversification of the GCC economies: Analysis of the preceding debate 1993-2003, Gulf Research Center: Dubai.
Medas, P. and Zakharova, D. (2009). A primer on fiscal analysis in oil-producing countries, IMF Working Paper 09/56 (Washington: International Monetary Fund).
Mink, M., Jacobs, J. and de Haan, J. (2007). Measuring synchronicity and comovement of business cycles with an application to the euro area, CESifo Working Paper 2112.
Osman, M.A., Louis, R.J. and Balli, F. (2008). Which output gap measure matters for the Arab Gulf Cooperation Council countries (AGCC): The overall GDP output gap or the non-oil Sector output gap? International Research Journal of Finance and Economics (forthcoming).
Petersen, M.A. (2009). Estimating standard errors in finance panel data sets: Comparing approaches, Review of Financial Studies 22, 435-480.
Qatar National Bank (QNB). (2009). Qatar Economic Review. May.
Ramazani, R.K. (1988). The Gulf Cooperation Council: Record and Analysis, University of Virginia Press.
Ravn, M. and Uhlig, H. (2002). On adjusting the Hodrick-Prescott filter for the frequency of observations, Review of Economics and Statistics 84, 371-375.
SABIC (Saudi Basic Industries Corporation), (2005). Overview of the Middle East Petrochemical Industry. http://www.sabic.com/corporate/en/newsandmediarelations/speeches/20050330.aspx (last visited September 13, 2009).
Salem-Ghanem, A.M., Al-Mahmeed, M.A., Al-Mejren, A.A., El-Sakka, M. and Paul, G. (2002). Competitiveness of banking sector in case of opening local markets to GCC banks, Al Masraf (Journal of the Union of Kuwaiti Banks) 2, 1-28.
Scott, A. (2000). Stylized facts from output gap measures, Reserve Bank of New Zealand Discussion Paper No. 2000/07, Wellington.
Shochat, S. (2008). The Gulf cooperation economies: Diversification and reform. LSE Kuwait Research Programme on Development, Governance and Globalization, February.
Sturm, M. and Siegfried, N. (2005). Regional monetary integration in the member states of the Gulf Cooperation Council, ECB Occasional Paper Series No. 31, June (Frankfurt: European Central Bank).
Sturm, M., Strasky, J., Adolf, P. and Peschel, D. (2008). The Gulf cooperation council countries: Economic structures, recent developments and the role in the global economy, ECB Occasional Paper Series No. 92, July (Frankfurt: European Central Bank).
Sturm, M., Gurtner, F. and Alegre, J.G. (2009). Fiscal policy challenges in oil-exporting countries: A review of key issues, ECB Occasional Paper Series No. 104, June (Frankfurt: European Central Bank).
Walti, S. (2009). The myth of decoupling, Manuscript, Swiss National Bank.
Watson, M. (2007). How accurate are real-time estimates of output trends and gaps? Economic Quarterly 93, 143-161. The Federal Reserve Bank of Richmond.
Woertz, E., Pradhan, S.R., Biberovic, N.and Jingzhong, C. (2008). Potential for GCC agro-investments in Africa and Central Asia, Gulf Research Center: Dubai.
Wooldridge, J.M. (2002). Introductory Econometrics: A Modern Approach, Second edition, Thompson South-Western Publisher.