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Impact of Oil Price Fluctuations on Economic Growth in Saudi Arabia: Evidence from a Nonlinear ARDL Approach

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  • Tomader Elhassan

    (Department of Administrative Sciences and Humanities, Jouf University, Qurayyat 77451, Saudi Arabia.)

Abstract

This study examined the asymmetric impact of oil price on economic growth in Saudi Arabia in 1970 2020 using annual data from the Saudi Central Bank and the World Bank. Applying a nonlinear autoregressive distributed lag model, this research focuses on the impact of oil price fluctuations, separating oil prices into negative and positive shocks. The results revealed the statistical significance of positive shocks on the partial sum of oil prices in both the short- and long term, whereas negative shocks had long term, but not short term, statistical significance on economic growth. The effect of positive shocks in oil price was greater than the effect of negative shocks in the long- and short term, and negative shocks were not an area of concern for the Saudi economy. Moreover, the coefficient of error correction terms (-1) had a negative and statistically significant value, indicating that any shock in the past years was corrected within one year at a rate of 54%. This study provides practical insights supporting policymakers development of sound policies and useful findings and approaches for economists and energy researchers. The promotion of advanced technology policies to reduce the economic risks of oil price fluctuations is essential.

Suggested Citation

  • Tomader Elhassan, 2021. "Impact of Oil Price Fluctuations on Economic Growth in Saudi Arabia: Evidence from a Nonlinear ARDL Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 579-585.
    • Handle: RePEc:eco:journ2:2021-05-66
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    References listed on IDEAS

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    Cited by:

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    2. Mohammad Imdadul Haque & Mohammad Rumzi Tausif, 2024. "Examining the Energy-Growth Dynamics in Saudi Arabia: Insights and Policy Implications," International Journal of Energy Economics and Policy, Econjournals, vol. 14(6), pages 697-706, November.

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    More about this item

    Keywords

    Asymmetric; Oil Price Fluctuations; Economic Growth; NARDL; Saudi Arabia;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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