Dynamic relationships between oil revenues, government spending and economic growth in an oil-dependent economy

Sbia, Rashid and Hamdi, Helmi (2013): Dynamic relationships between oil revenues, government spending and economic growth in an oil-dependent economy.

Abstract

The aim of this paper is to empirically examine the relationship between Oil revenues, government spending and GDP growth in the kingdom of Bahrain. Oil revenues are the main source of financing government expenditures and imports of products. Increasing oil prices in the recent years have boosted public expenditures on social and economic infrastructure. In this paper we will investigate whether the huge government spending has enhanced the pace of economic growth or not. To this end we use a trivariate cointegration analysis and error-correction model and data for 1960-2010. Overall results suggest that oil revenues remain the principal source for growth and the main channel which finance the government spending.

• Item Type: MPRA Paper
• Language: English
• Keywords: Oil revenues, Government expenditures, Economic Growth, Bahrain, ECM
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N15 - Asia including Middle East

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