Abstract
This study investigates the effect of oil and non-oil exports on economic growth in Bahrain over the period 1977-2015. The cointegration analysis shows that economic growth was positively and significantly related to exports. However, oil effects have the biggest effect on real GDP. Also, results show that oil exports have a positive impact on economic growth both in the short run and in the long run. Therefore, further encouragement of non-oil sectors and higher diversification of exports would lead to positive effects on the economy.
Highlights
The theory of economic growth provided by the classical school of modern economics, and later supported by neo-classical economists, assumes a strong correlation between exports and economic growth
This paper studies the contribution of oil exports (OX) to Bahrain economic growth in the short run and in the long run
In order to avoid the economic risk from volatility of export prices, many economists distinguish between the roles of extensive margin and intensive margin in economic growth
Summary
The theory of economic growth provided by the classical school of modern economics, and later supported by neo-classical economists, assumes a strong correlation between exports and economic growth. Export concentration on OX may negatively affect other industries, and generate “Dutch disease.” It can create high decline in demand from trade partners because of economic recessions or increasing use of energy substitutes. Khayati: The Effects of Oil and Non-oil Exports on Economic Growth in Bahrain of these countries This would induce potential risks on financial stability. Bahrain has been able to form an environment suitable to a relative growth in non-oil sectors through legislations as well as fiscal and monetary policies, including government expenditure and subsidy, in addition to local currency stability. In their study of 95 abundant natural resources’ countries, Sachs and Warner (1995) showed a negative relationship between growth and exports of primary goods. Harb (2009) cited that Dutch disease is unlikely to occur in the case of GCC countries since foreigners represent an important composition of the labor force
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
