Oil Prices and Fiscal Policy in an Oil-exporter country: Empirical Evidence from Oman

Aljabri, Salwa and Raghavan, Mala and Vespignani, Joaquin (2021): Oil Prices and Fiscal Policy in an Oil-exporter country: Empirical Evidence from Oman.

Abstract

This paper studies the impact of oil price shocks on fiscal policy and real GDP in Oman using new unexplored data. We find that an oil price shock explains around 22% and 46% of the variation in the government revenue and GDP, respectively. Decomposing the government revenue and GDP further into petroleum and non-petroleum related components, we find that an oil price shock explains around 26% of the variation in petroleum revenue and 90% of the petroleum-GDP. Though petroleum and non-petroleum GDP respond positively to oil price shocks, government expenditure is not affected by oil prices but is affected by government revenue. The results suggest that the Omani government uses its reserve fund and local and international debt to smooth and reduce the impact of oil price fluctuations.

• Item Type: MPRA Paper
• Language: English
• Keywords: oil price shocks, fiscal policy, GDP, SVAR
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance

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