Resource Price, Macroeconomic Distortions, and Public Outlay: Evidence from Oil-Exporting Countries

Samson Adeniyi Aladejare

International Economic Journal, 2018, vol. 32, issue 2, 199-218

Abstract: This study examines the repercussions of oil price and macroeconomic distortions on government expenditure in 15 oil-exporting countries. Adapting the Pooled Mean Group analytical approach, the long-run findings are indicative of a blend of the Dutch disease and rent-seeking hypothesis of the resource curse theory in oil-exporting countries. These effects crucially impact on the poor growth of the real sector in these countries, needed for diversification of their revenue base. Furthermore, both resource curses account for one of the reasons why fiscal deficits in oil-exporting countries have been on the rise. The country short-run coefficient for the balance of payment, economic growth, and exchange rate also supports the Dutch disease and rent-seeking hypothesis mix found in the long run. Also, the significant negative impact of oil rents in most countries shows that oil-exporting countries have been making attempts at diversifying their income sources; this is because proceeds from oil cannot be relied upon to adequately finance growing government expenditure, due to the volatile nature of oil prices, thus suggesting also that the volatility hypothesis is valid for most oil-exporting countries in the short run.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:32:y:2018:i:2:p:199-218

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DOI: 10.1080/10168737.2018.1481128

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