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The effect of oil rent on economic development in Saudi Arabia: Comparing the role of globalization and the international geopolitical risk

Osama Sweidan () and Khadiga Elbargathi

Resources Policy, 2022, vol. 75, issue C

Abstract: We explored the effect of globalization and international geopolitical risks on Saudi Arabia's economic development via the channel of Saudi's oil rent during the period 1970–2018. In addition, we tested if globalization and international geopolitical risk can strengthen or weaken the impact of oil rent on Saudi Arabia's economic development. A time series autoregressive distributed lag model with moderation effects was used to achieve the paper's objective. Our results revealed that the direct short and long run effects of oil rent and globalization are statistically significant and positive, while the influence of international geopolitical risk is statistically insignificant in the short and long run. However, adding the moderation effects to the analysis reversed the results. The interaction terms of our paper are significant and negative. It implies that the interaction terms deflate the direct positive effects. Therefore, the final effect of oil rent and globalization could be either positive or negative, while the final effect of the international geopolitical risk is negative. The findings from the current paper confirms that globalization effect is dominant on economic development, compared to geopolitical risk. The policy implication of our paper focuses on diversifying Saudi's economy and strengthen Saudi Arabia's institutional framework.

Keywords: Economic development; Oil rent; Globalization index; Geopolitical risk; ARDL model; The Kingdom of Saudi Arabia (search for similar items in EconPapers)
JEL-codes: F51 F63 O13 O19 Q34 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:75:y:2022:i:c:s0301420721004773

DOI: 10.1016/j.resourpol.2021.102469

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