Abstract
This research paper investigates the impact of natural resources volatility on economic growth. The paper focused on three resource-rich economies, namely, UAE, Saudi Arabia, and Oman. Using data from 1970 to 2016 and employing the autoregressive distributed lag (ARDL) cointegration approach, we found that both natural resources and their volatility matter from the perspective of growth. The study found strong evidence in favor of a positive and statistically significant relationship between natural resources and economic growth for the economies of UAE and Saudi Arabia. Similarly, for the economy of Oman, a positive but insignificant relationship is observed between natural resources and economic growth. However, we found that the volatility of natural resources has a statistically significant negative impact on the economic growth of all three economies. This study contradicts the traditional concept of the resources curse and provides evidence of the resources curse in the form of a negative impact of volatility on economic growth.
Highlights
Growth: Evidence from the Resource-Looking at the UN human development report (2015), we can see that major oil and gas producing nations like Norway, Australia, and Canada are at the top of the list, while other major natural resources producing countries like Argentina, Brunei, Saudi Arabia, Qatar, UAE, and Kuwait reached a very high ranking in the UN human development report
The study found that the volatility of natural resources has a strong and statistically significant negative impact on the economic growth of all three countries
The results obtained have revealed that, natural resources matter from the perspective of economic growth
Summary
Growth: Evidence from the Resource-Looking at the UN human development report (2015), we can see that major oil and gas producing nations like Norway, Australia, and Canada are at the top of the list, while other major natural resources producing countries like Argentina, Brunei, Saudi Arabia, Qatar, UAE, and Kuwait reached a very high ranking in the UN human development report. The impact of natural resource abundance on the economic performance of countries has been widely discussed in the research literature. Studies like Gelb (1988); Auty (1990); Sachs and Warner (1995, 2001), and Gylfason (2001) concluded that natural resource abundant countries tend to grow slower compared to resource scarce countries. This phenomenon was named the natural resource curse. The debate on the natural resource curse is far from over, and many studies found that the presence of a natural resource curse is dependent on contingent factors
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