Has the non-oil sector decoupled from oil sector? A case study of Gulf Cooperation Council Countries

Syed Abul Basher

MPRA Paper from University Library of Munich, Germany

Abstract: As oil and gas are exhaustible resources, the need for economic diversification has gained momentum in the Gulf Cooperation Council (GCC) countries immediately after the end of the first oil boom in 1973-74. Economic diversification, in the context of GCC countries, implies development of the non-oil sector and reduction of the proportion of government revenue and export proceeds from the oil and gas sector. Applying newly developed measures of business cycle synchronicity between oil and non-oil sectors in three GCC economies (Kuwait, Qatar and Saudi Arabia), we show both the degree of diversification achieved so far and the direction of diversification in terms of individual non-oil sectors. Overall, Kuwait and Saudi Arabia appear to be moderately ahead than Qatar in reducing their dependence on oil. Nevertheless, by developing large production capacities of natural gas, Qatar has recently reduced its dependence on oil in favor of natural gas. A quantitative assessment of the determinants of business cycle synchronization is also provided.

Keywords: Business cycle; Synchronization; Oil price; Fiscal policy; GCC countries (search for similar items in EconPapers)
JEL-codes: E32 E62 H30 Q32 (search for similar items in EconPapers)
Date: 2010-03-02
New Economics Papers: this item is included in nep-ara, nep-cwa, nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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