Economic Diversification, Oil Revenue and Energy Transition in Oil Dependent Countries: A Wavelet Decomposition and Panel Data Approach

Salem Hathroubi, Chaker Aloui and Hela Ben Hamida
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Salem Hathroubi: Imam Mohammad IBN Saud Islamic University, Saudi Arabia
Chaker Aloui: Prince Sultan University, Saudi Arabia
Hela Ben Hamida: Imam Mohammad IBN Saud Islamic University, Saudi Arabia

International Journal of Energy Economics and Policy, 2024, vol. 14, issue 5, 447-456

Abstract: In oil-dependent countries, the energy transition process is ongoing and it appeals substantial and necessary adjustments in terms of diversification. We attempt to provide a systematic analysis of the connectedness between energy transition, oil revenue and economic diversification using novel econometric approach, wavelet decomposition and panel data estimation. Our attention will be focused on the dynamics and causal relationships between energy transition process and economic diversification by checking the role of oil revenue. We use second generation unit roots, and a particular attention is given to cross-sectional dependence of the series. Results show that correlations between wavelet components are absent in the short term, weak in the medium term, and moderate in the long-run. Causality tests support a bidirectional causality between economic diversification and energy transition and between economic diversification and net oil revenue, in the medium and long-run scale levels. Our results would have several prominent implications for policy makers, in oil-dependent countries, when designing energy transitions and economic diversifications strategies, and gives and insightful look about the future of these countries.

Keywords: Energy Transition; Oil Revenue; Economic Diversification; Wavelet Decomposition; Panel Data (search for similar items in EconPapers)
JEL-codes: C23 C33 Q32 Q48 (search for similar items in EconPapers)
Date: 2024
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