Abstract
This study examined the asymmetric impact of oil price on economic growth in Saudi Arabia in 1970–2020 using annual data from the Saudi Central Bank and the World Bank. Applying a nonlinear autoregressive distributed lag model, this research focuses on the impact of oil price fluctuations, separating oil prices into negative and positive shocks. The results revealed the statistical significance of positive shocks on the partial sum of oil prices in both the short- and long term, whereas negative shocks had long term, but not short term, statistical significance on economic growth. The effect of positive shocks in oil price was greater than the effect of negative shocks in the long- and short term, and negative shocks were not an area of concern for the Saudi economy. Moreover, the coefficient of error correction terms (−1) had a negative and statistically significant value, indicating that any shock in the past years was corrected within one year at a rate of 54%. This study provides practical insights supporting policymakers' development of sound policies and useful findings and approaches for economists and energy researchers. The promotion of advanced technology policies to reduce the economic risks of oil price fluctuations is essential.Keywords: Asymmetric, Oil Price Fluctuations, Economic Growth, NARDL, Saudi ArabiaJEL Classifications: C32, E32, E32, F43, O47, Q43DOI: https://doi.org/10.32479/ijeep.11574
Highlights
Economic growth is a key macroeconomic indicator
This study aimed to examine the asymmetric impact of oil price fluctuations on economic growth in Saudi Arabia
In contrast to previous research on Saudi Arabia, this study presents the first study to introduce control variables, adding the effect of structural breakpoint to the dependent variables
Summary
Economic growth is a key macroeconomic indicator. Oil became one of the factors affecting such growth following the expansion of the industrial revolution. Global demands for energy increased exponentially, in the second half of the nineteenth century. Energy consumption accelerated the progress of industrialization and economic growth worldwide (Kırca et al, 2020). Previous studies have obtained divergent results related to the effect of oil price on economic growth. Some studies have indicated a statistically significant relationship between oil price and real gross domestic product (GDP) (Darby, 1982; Hamilton, 1983; Rasche and Tatom, 1977; Santini, 1985). (Chang and Wong, 2003) concluded that the relationship was marginal
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