Economic Stability in the GCC Countries

Ziyad Alfawzan
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Ziyad Alfawzan: King Abdullah Petroleum Studies and Research Center

Discussion Papers from King Abdullah Petroleum Studies and Research Center

Abstract: Evidence confirms that there is a positive correlation between the economic growth rate and its volatility/risk in the Gulf Cooperation Council (GCC) region. In other words, there is a trade-off between the benefits of oil and gas activity and the volatility resulting from unpredictable commodity price swings in such resource dependent economies. Our analysis uses a financial portfolio framework approach (and more specifically an efficient frontier analysis), treating economic sectors as individual investments. We calculate a relative risk measure termed the ‘beta coefficient’ and assemble a portfolio of sectors with varying weights to find the efficient frontier. If the beta of the portfolio representing the economy is above global average, the economy will generally grow faster than the global average but with greater volatility – the upturns will be higher and the downturns deeper. We aim to shed light on diversification policy from this novel, if not yet widely accepted, perspective.

Keywords: Economic Diversification; Economic Growth; Energy Markets; Gulf Cooperation Council (GCC); National Transformation Plan (NTP) 2020; Natural Gas; Oil; Portfolio Framework; Vision 2030 (search for similar items in EconPapers)
Pages: 40
Date: 2017-03-08
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Persistent link: https://EconPapers.repec.org/RePEc:prc:dpaper:ks-2017--dp03

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