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Oil Revenues and Economic Growth in Saudi Arabia

Author

Listed:
  • Moayad H. Al Rasasi*

    (Economic Research Department Saudi Arabian Monetary Authority, Saudi Arabia)

  • John H. Qualls

    (Economic Research Department Saudi Arabian Monetary Authority, Saudi Arabia)

  • Bander K. Algamdi

    (Economic Research Department Saudi Arabian Monetary Authority, Saudi Arabia)

Abstract

This paper examines the relationship between Saudi oil revenues and the Kingdom’s economic growth over the past 47 years. In analyzing the data that are needed for this analysis, problems were encountered with the basic real GDP and government oil revenue data that are typically used. The most widely-used measure of non-oil private sector activity that is available, the Non-Oil Private Institutional Sector GDP, does not include the Gross Value Added of all of the private activities, omitting over SAR 80 billion of real activity (in 2010 prices). A new series was constructed, consisting of all of the non-oil private activities, including the recently corporatized/privatized companies. In addition, the oil revenue data prior to 1987 were found to be unsatisfactory for use as published, due to their being based on the 354-355 day Hijra calendar. A new conversion methodology, based on a recently published paper by Qualls et al. (2017), was applied, and the pre-1987 data were converted to a consistent Gregorian basis with good results. The two series were determined to have a unit root of order one, with a highly significant long-run relationship. An error-correction model was then estimated, and highly significant short- and long-run relationships were found. A Ganger Causality test was performed, with the results confirming the ECM’s results, with real government oil revenue growth “Granger-causing†real private-sector GDP growth. Finally, the new non-oil activity GDP measure produced better results than did the traditionally-used Non-Oil Private Sector GDP.

Suggested Citation

  • Moayad H. Al Rasasi* & John H. Qualls & Bander K. Algamdi, 2019. "Oil Revenues and Economic Growth in Saudi Arabia," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 5(3), pages 49-55, 03-2019.
    • Handle: RePEc:arp:ijefrr:2019:p:49-55
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    Citations

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    Cited by:

    1. Nigar Huseynli, 2022. "Impact of Revenues from Oil and Non-Oil Sectors on the Economic Growth of Azerbaijan," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 31-35, September.
    2. Anis Ali, 2021. "Do Oil Prices Govern GDP and Public Spending Avenues in Saudi Arabia? Sensitivity and Trend Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 104-109.
    3. Abdul Rahman Shaik & Anis Ali & Ibtisam Dhuwayhi Alanazi, 2023. "Working Capital and Financial Performance in the Energy Sector of Saudi Arabia: Moderating Role of Leverage," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 158-163, May.
    4. Esmaeili, Parisa & Rafei, Meysam, 2021. "Dynamics analysis of factors affecting electricity consumption fluctuations based on economic conditions: Application of SVAR and TVP-VAR models," Energy, Elsevier, vol. 226(C).
    5. Farahnak, Fardin, 2022. "Comparative analysis of oil-driven economic policies for Saudi Arabia and Iran; using the CGE model," Resources Policy, Elsevier, vol. 78(C).
    6. Arvian Triantoro & Muhammad Zaheer Akhtar & Shiraz Khan & Khalid Zaman & Haroon ur Rashid Khan & Abdul Wahab Pathath & Muhamad Amar Mahmad & Kamil Sertoglu, 2023. "Riding the Waves of Fluctuating Oil Prices: Decoding the Impact on Economic Growth," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 34-50, March.
    7. Neelufer Aslam & Swati Shastri, 2019. "Relationship Between Oil Revenues and Gross Domestic Product of Oman: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 195-201.
    8. Ahmed Elgayar & Sameh Serag & Noura Metawa, 2024. "Navigating Financial Performance of the MENA Region Energy Sector: The Interplay of Working Capital and Leverage," International Journal of Economics and Financial Issues, Econjournals, vol. 14(2), pages 45-53, March.
    9. Rotimi Ayoade Ogunjumo & Nuhu Musa & Ibrahim Adama & Silas Idoko Abu & Hitlar Inedu & Salami Hamzat & Stephen Adesina Ibitowa, 2024. "Nigeria’s Volatile Oil Revenue: Is There a Cause for Concern?," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 299-303, March.
    10. Anis Ali, 2021. "Volatility of Oil Prices and Public Spending in Saudi Arabia: Sensitivity and Trend Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 165-172.
    11. Mohammad Imdadul Haque & Md Riyazuddin Khan, 2019. "Role of Oil Production and Government Expenditure in Improving Human Development Index: Evidence from Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 251-256.

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