EconPapers    
Economics at your fingertips  
 

Oil price collapse and challenges to economic transformation of Saudi Arabia: A time-series analysis

Fredj Jawadi () and Zied Ftiti

Energy Economics, 2019, vol. 80, issue C, 12-19

Abstract: This paper studies the impact of oil price changes on economic growth in Saudi Arabia to measure its dependency on the crude oil sector. To this end, an On/Off threshold regression is specified to allow the oil/GDP relationship to be asymmetric, nonlinear, and time-varying with regard to the business cycle phases. Further, we empirically test the diversification hypothesis put forward by the National Transformation Program (Saudi Vision 2030) to check whether the equity-energy investment initiative could boost economic growth in Saudi Arabia. First, our findings confirm the contribution of the oil sector to economic growth in the country, but also show that the oil/Saudi economy relationship exhibits nonlinearity and threshold effects, as the impact of oil price varies per regime depending on the state of the market. Second, in line with the Vision 2030 expectations, we are in favor of transforming the economy and opening its equity market. We also quantify a positive and significant impact of equity investment on the Saudi Arabian economy. Further, this diversification route will stimulate a beneficial oil effect on the real economy.

Keywords: Oil price; Economic growth; Diversification; Saudi vision 2030; Nonlinearity; Threshold effect (search for similar items in EconPapers)
JEL-codes: C2 G10 Q43 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988318304857
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:80:y:2019:i:c:p:12-19

DOI: 10.1016/j.eneco.2018.12.003

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2020-02-20
Handle: RePEc:eee:eneeco:v:80:y:2019:i:c:p:12-19