Exploring the impact of oil revenues on OPEC members' macroeconomy

Abstract

This study investigated the impact of oil revenues on the macroeconomy in the Organization of Petroleum Exporting Countries (OPEC). The panel model was used taking the period 2000-2011 when oil prices increased to high levels causing an increase in the oil revenues of the investigated countries. The results showed that oil exports revenues have a long-run and a short-run positive relationship with the gross domestic product, domestic investment, government consumption expenditure and the consumer price index. However, the results also showed that oil exports revenues have a long-run and a short-run negative relationship with the real exchange rate, gross domestic savings and the current account balance. Therefore, it was recommended that these countries should reduce their level of domestic consumption and increase their domestic savings. It was also recommended that these countries should reduce their real exchange rate appreciation and use more flexible exchange rate regimes.

Plunging Oil Prices Impact Malaysia’s and Indonesia’s Economy

“…From the short run view, the changes in oil price will have a direct impact on the GDP; from the long run view, the impact of the oil price fluctuations is stationary. Ito (2012), who studied the Russia economy, and Almulali and Sab (2013), who studied the economy for OPEC, also found out the similar result. In addition, Cunado and De Gracia (2005) examined the relation between the oil price shocks and GDP for both oil exporter (Malaysia) and oil importer (Japan, Philippines, Singapore, Thailand and South Korea).…”

“…As a result, the combination of the shifting of demand and supply curves caused the price increase and thereby the inflation. For the case of OPEC, Almulali and Sab (2013) also stated there is a positive relationship between oil price hike and inflation. This was due to the high domestic spending as the country's revenue increase.…”

“…From the perspective of Kuwait (oil exporter), Eltony and Al-Awadi (2001) mentioned there was a significant influence of oil price fluctuations on the Kuwait government expenditure. From the perspective of OPEC and other oil exporting countries, Almulali and Sab (2013) and El Anshasy and Bradley (2012) indicated the increase of oil price will stimulate the government expenditures as well. El Anshasy and Bradley (2012) stated the country that highly depended on oil production will have a higher increment of government expenditures when oil price hike.…”

“…The fluctuations of the domestic currency or foreign currency can hugely affect the country's economy such as terms of trade, as measured by using real exchange rate, which incorporates the purchasing power (Almulali and Sab, 2013;Al-mulali and Sab, 2011;Iwayemi and Fowowe, 2011). It is calculated by deflating the nominal exchange rate with the ratio of consumer price index (Iwayemi and Fowowe, 2011).…”

Impact of Oil Price Changes on Certain Budget Variables, Government and Tax Revenues, External Grants, and Government Expenditures in Jordan

“…Moreover, in Tunisia, positive and negative oil price shocks significantly affect government spending (Jbir & Zouari-Ghorbel, 2009). These results were supported by Almulali and Che Sab (2013), who affirmed that a surge in oil price causes oil revenues to increase in OPEC countries, which, in turn, positively influences government expenditures. However, such matter is yet to be proven.…”