Basher, Syed Abul and Fachin, Stefano (2011): The long-run relationship between savings and investment in oil-exporting developing countries: A case study of the Gulf Arab States.
Download (361Kb) | Preview
The relationship between national saving and investment over the long term is examined for six Gulf Arab oil-exporting developing countries -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. We show that, provided some large outliers are properly accounted for, long-run equilibrium relationships between saving and investment (both total and fixed) exist in these countries. Since these countries have typically large current account surpluses such relationships cannot be explained by standard arguments. Our hypothesis is that the response of investment to saving largely depends on domestic absorptive capacity.
|Item Type:||MPRA Paper|
|Original Title:||The long-run relationship between savings and investment in oil-exporting developing countries: A case study of the Gulf Arab States|
|Keywords:||Saving-investment correlation; oil-exporting developing countries; GCC countries; absorptive capacity; outlier detection; integrated process.|
|Subjects:||H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures; Other Public Investment and Capital Stock
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment; Capacity
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
|Depositing User:||Syed Basher|
|Date Deposited:||23. Feb 2011 20:48|
|Last Modified:||14. Feb 2013 13:47|
Abi-Aad, N. (2009): Energy in the Mediterranean and the Gulf: Opportunities for synergies, Documenti IAI 0935, Istituto Affari Internazionali, December.
Albatel, A.H. (2005): Government budget deficits and the crowding out of private sector investment in Saudi Arabia, Journal of King Saud University, Administrative Sciences, 17, 1-28.
Al-Hassan, A., Oulidi, N. and Khamis, M. (2010): The GCC banking sector: Topography and analysis, IMF Working Paper No. 10/87 (Washington: International Monetary Fund).
Amuzegar, J. (1983). Oil Exporters’ Economic Development in an Interdependent World, Occasional Paper No. 18, (Washington: International Monetary Fund).
Amuzegar, J. (2001). Managing The Oil Wealth, I.B. Tauris Publishers, London.
Apergis, N. and Tsoumas, C. (2009). A survey of the Feldstein-Horioka puzzle: What has been done and where we stand, Research in Economics 63, 64-76.
Auty, R.M. (2001). The political state and the management of mineral rents in capital surplus economies: Botswana and Saudi Arabia, Resources Policy 27, 77-86.
Barnett, S. and Ossowski, R. (2002). Operational aspects of fiscal policy in oil-producing countries, IMF Working Paper No. 02/177 (Washington: International Monetary Fund).
Basher, S.A. (2010). Has the non-oil sector decoupled from oil sector? A case study of Gulf Cooperation Council countries. Manuscript.
Bayoumi, T.A. (1990). Saving-investment correlation: Immobile capital, government policy, or endogenous behavior? IMF Staff papers 37, 360-387.
Bohnet, I., Herrmann, B. and Zeckhauser, R. (2010). Trust and the reference points for trustworthiness in Gulf and Western countries, Quarterly Journal of Economics 125, 811- 828.
Chinn, M.D. and Ito, H. (2008). A new measure of financial openness, Journal of Comparative Policy Analysis: Research and Practice 10, 309-322.
Collier, P. and Gunning, J.W. (2007). Savings and Investment in a Poor Oil Economy: Beyond the Textbook Case, Manuscript, Centre for the Study of African Economies, Oxford University.
Commission on Growth and Development (2008). The Growth Report: Strategies for Sustained Growth and Inclusive Development, Washington DC.
Di Iorio, F. and Fachin, S. (2010a). A Panel Cointegration Study of the Long-Run Relationship between Savings and Investments in the OECD Economies, 1970-2007, MRPA Working Paper No. 25873.
Di Iorio, F. and Fachin, S. (2010b). Savings and Investments in the OECD, 1970-2007: A Panel Cointegration Test with Breaks, MRPA Working Paper No. 26969.
ESCWA (2008). Capital flows in ESCWA countries, Chapter 2 In Survey of Economic and Social Developments in the ESCWA Region, 2007-2008, Economic and Social Commission for Western Asia, United Nation.
Feldstein, M. and Horioka, C. (1980). Domestic saving and international capital flows, Economic Journal 90, 314-329
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. andWilson, J.F. IMF Occasional Paper No. 150, (Washington: International Monetary Fund).
G´omez, V. and Maravall, A. (2001) Automatic Modeling Methods for Univariate Series, Ch.7 in Pe˜na D., Tiao G.C. and Tsay, R.S. (eds.), A Course in Time Series Analysis, New York: J. Wiley and Sons.
Hadiwibowo, Y. (2010). Capital inflows and investment in developing countries: The case of Indonesia. International Journal of Applied Economics and Finance 4, 220-229.
Hirschman, A.O. (1958). The Strategy of Economic Development. New Haven: Yale University Press.
IIF. (2008). Country Report: Qatar, September 11, 2008, Institute of International Finance, Washington.
IMF. (1997). Kuwait: From Reconstruction to Accumulation for Future Generation, IMF Occasional Paper No. 150, (Washington: International Monetary Fund).
IMF. (2008). The rise in inflation in the GCC countries, In Regional Economic Outlook: Middle East and Central Asia, May 2008. (Washington: International Monetary Fund).
IMF. (2009). Global Financial Stability Report, October Update (Washington: International Monetary Fund).
Jansen, W.J. and Schulze, G.G. (1996). Theory-based measurement of the saving-investment correlation with an application to Norway, Economic Inquiry 34, 116-132.
Juselius, K. (2006) The Cointegrated VAR Model: Methodology and Applications Oxford University Press, Oxford.
Looney, R. (1992). Real or illusory growth in an oil-based economy: Government expenditures and private sector investment in Saudi Arabia, World Development 20, 1367-1375.
Looney, R. (2004). The Saudi Arabian quandary: The economy’s inability to sustain growth, METU Studies in Development 31, 71-92.
Looney, R. (2009). The Omani and Bahraini paths to development: Rare and contrasting oil-based economic success stories, UNU-WIDER Research Paper No. 2009/38, available online: http://ideas.repec.org/p/unu/wpaper/rp2009-38.html.
Montiel, P.J. (1994). Capital mobility in developing countries: Some measurement issues and empirical estimates, World Bank Economic Review 8, 311-350.
Mundell, R.A. (1963). Capital mobility and stabilization policy under fixed and flexible exchange rates, Canadian Journal of Economics 29, 475-485.
Murphy, R.G. (1984). Capital mobility and the relationship between saving and investment in OECD countries, Journal of International Money and Finance 3, 327-342.
Nason, J.M. and Rogers, J.H. (2002). Investment and the current account in the short run and the long run, Journal of Money, Credit and Banking 34, 967-986.
Nielsen, H.B. (2004). Cointegration analysis in the presence of outliers, Econometrics Journal 7, 249-271.
Obstfeld, M. and Rogoff, K. (1995). The intertemporal approach to the current account, In Handbook of International Economics, edited by Gene M. Grossman and Kenneth Rogoff. New York: North-Holland Publishing Co.
Obstfeld, M. and Rogoff, K. (2000). The six major puzzles in international macroeconomics: Is there a common cause? NBER Working Paper No. 7777.
Ossowski, R., Villafuerte, M., Medas, P.A. and Thomas, T. (2008). Managing the Oil Revenue Boom: The Role of Fiscal Institutions, Occasional Paper No. 260, (Washington: International Monetary Fund).
Pindyck, R.S. (2004): Volatility in natural gas and oil markets, Journal of Energy and Development 30, 1-19.
Sala-i-Martin, X. and Artadi, E.V. (2002). Economic Growth and Investment in the Arab World, Columbia University Working Paper.
Sester, B. and Ziemba, R. (2009). GCC Sovereign Funds: Reversal of Fortune, Working Paper, January. New York: Council on Foreign Relations.
Sinha, T. and Sinha, D. (2004). The mother of all puzzles would not go away, Economics Letters 82, 259-267.
Sturm, M., Strasky, J., Adolf, P. and Peschel, D. (2008). The Gulf Cooperation Council countries economic structures, recent developments and role in the global economy, ECB Occasional Paper Series No. 92, June (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).
Vogelsang, T.J. (1999). Two simple procedures for testing for a unit root when there are additive outliers, Journal of Time Series Analysis 20, 237-252.
World Bank. (2006). Experiences with Oil Funds: Institutional and Financial Aspects, Energy Sector Management Assistance Program Report No. 321/06 (Washington).