The Role of Savings in Reducing the Effect of Oil Price Volatility for Sustainable Economic Growth in Oil Based Economies: The Case of GCC Countries

摘要

We investigate the simultaneous links between oil price changes, national savings, legal and institutional development, and economic growth in the Gulf Cooperation Council (GCC) countries. Our study includes six GCC countries namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. We base our analysis on annual data that covers the period from 1980 to 2011. We implement different methodologies on time series cross sectional data: First, we test our model using fixed effect and random effect model techniques; Second, we employ Arellano-Bond/Blundell-Bond estimator to reduce the endogeneity problem that is common in this kind of studies. Results reveal a nonlinear and concave relationship between saving rates and economic growth. This result suggests that, at low level of economic growth, the increase in savings leads to high economic growth. However, as the countries’ revenues and surpluses increase significantly (at higher levels in revenues and savings), high level of savings lead to lower growth in the economy. This might due to the lack of absorption capacity of the GCC markets. In addition, controlling for different factors, oil price changes explain the variability in the economic growth of the GCC countries. Economic globalization affects growth negatively, while institutional quality plays no role in economic growth of the GCC markets.