The effect of oil prices on the economic diversification process: evidence from the GCC countries

Abstract

We investigate the Granger non-causality relationship between oil prices and the economic diversification process in the GCC countries during the period 1989-2017. This paper uses Pedroni's (2004) panel cointegration tests and the panel non-causality test of Dumitrescu-Hurlin (2012) to achieve its goals. We find that oil price changes Granger cause the movements in the diversification progression. It indicates that economic diversification of the GCC countries is not a priority to the GCC governments because their role is changing. As a result, the GCC countries should give priority to the economic diversification if it is a strategic plan for their economies.