Oil Revenue and State Budget Dynamic Relationship: Evidence from Bahrain

Fuad M.M Kreishan, Mohamed Sayed Abou Elseoud and Mohammad Selim
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Fuad M.M Kreishan: College of Business Administration, University of Bahrain, Bahrain, College of Business Administration & Economics, Jordan,
Mohamed Sayed Abou Elseoud: College of Business Administration, University of Bahrain, Bahrain, Sadat Academy for Management Sciences, Egypt,
Mohammad Selim: College of Business Administration, University of Bahrain, Bahrain.

International Journal of Energy Economics and Policy, 2018, vol. 8, issue 6, 174-179

Abstract: The main purpose of the study is to investigate the short run and long run relationship between government revenues and government expenditures in Bahrain over the period from 1990 to 2017. Using annual data and time series analysis, the study indicated that the above two variables, government revenues and government expenditures were integrated of order one when both Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) unit root tests were applied. The empirical results have revealed that unidirectional causality runs from government revenues to government expenditures. Thus, there is evidence in support of revenue-spend hypothesis. Finally, the results revealed that a 1% increase in oil revenue induces an increase in government expenditures by 1.37%. Therefore, policymakers in Bahrain should focus to further diversify the sources of government revenues from non-oil sectors in such a way that the country will be immune to vulnerability, especially when world oil market performs poorly.

Keywords: Oil revenues; Cointegration; Government expenditures; Government revenues; Granger causality; Bahrain. (search for similar items in EconPapers)
JEL-codes: C30 C40 C51 E62 H20 H30 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2018-06-22

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