Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers

22 Pages Posted: 5 May 2017

See all articles by Amany El-Anshasy

Amany El-Anshasy

United Arab Emirates University (UAEU)

Kamiar Mohaddes

University of Cambridge - Judge Business School; University of Cambridge - King's College, Cambridge

Jeffrey B. Nugent

University of Southern California - Department of Economics

Date Written: 2017-04-01

Abstract

This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961-2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such.

JEL Classification: C23, E02, F43, O13, Q32

Suggested Citation

El-Anshasy, Amany and Mohaddes, Kamiar and Nugent, Jeffrey B., Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers (2017-04-01). Globalization and Monetary Policy Institute Working Paper No. 310, Available at SSRN: https://ssrn.com/abstract=2962915 or http://dx.doi.org/10.24149/gwp310

Amany El-Anshasy (Contact Author)

United Arab Emirates University (UAEU)

P.O. Box 15551
Al-Ain
United Arab Emirates

Kamiar Mohaddes

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

University of Cambridge - King's College, Cambridge ( email )

King's Parade
Cambridge, CB2 1ST
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

Jeffrey B. Nugent

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
510-740-2107 (Phone)
510-740-8543 (Fax)

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