Oil Rents Research Articles

Role of financial inclusion and natural resources for green economic recovery in developing economies

The role of natural resources in economic growth has been a topic of contention for almost three decades. Financial growth and natural resource prices are closely intertwined, but the relationship between the two has been relatively understudied. In the context of green economic recovery in developing economies, the importance of managing price volatility of natural resources and building financial inclusion has become increasingly evident. As natural resources play a critical role in the economies of developing countries, promoting sustainable practices through financial inclusion policies is essential for green economic recovery. Therefore, this study assesses the significance of green technology in developing economies from 1990 to 2020, focusing on the connection between natural resources and the media economy. Short- and long-term economic efficiency was shown to be positively affected by natural resource volatility, oil rents, gas rents, the media economy, and green innovation. These results are supported by the long-run estimator improved mean group (AMG). Furthermore, Dumitrescu and Hurlin's Granger panel causality heterogeneity test demonstrated a bidirectional causal link between the examined variables and financial development. Green marketing, price limits, and natural resource hedging are discussed as potential solutions to a region's financial inefficiency and natural resource price volatility.

Oil rents and non-oil economic growth in CIS oil exporters. The role of financial development

The role of financial development is vital in long-run economic growth. Due to the windfall revenues it might have extra relevance in natural resource-rich developing economies. This study explores whether financial development, measured in the percentage share of the bank loans to the private sector in GDP, can facilitate the impact of oil rents on the development of the non-oil sector in Commonwealth of Independent States oil exporters: Azerbaijan, Kazakhstan, and Russia in the long run. It develops a combined framework where financial development acts as both a threshold variable and an interaction term for the impact of oil rents on non-oil GDP. We find a threshold effect of oil rents for the non-oil sector in Azerbaijan and Kazakhstan. It shows that the same magnitude of oil rents can create more non-oil growth if financial development exceeds 9.6% and 15.5% in Azerbaijan and Kazakhstan, respectively. For Russia, neither threshold nor interaction effects were found – oil rents have a linearly positive impact on non-oil economic development. Moreover, we find that institutional quality fosters non-oil development in Azerbaijan. It also positively affects non-oil development in Kazakhstan and Russia, albeit statistically insignificant. In the design of policies, authorities may wish to implement measures that would lead to the further development of the financial sector and institutional quality to make oil rents more beneficial for the development of the non-oil sector.

Oil rents, trade environment and financial development: An international evidence

Given the important role that the trade environment and natural resource endowment play in the economy, this study aims to examine the interrelationship between trade environment and oil rents and how both interact to influence financial development. We test our argument on a sample of 189 economies over the 2004–2020 period, using a two-step System Generalized Method of Moments, with collapsed instruments and Windmeijer robust standard errors. We find that FDI and ease of doing business tend to increase oil rents based on the resource blessing hypothesis. However, our findings suggest that, trade openness in oil producing countries is not a possible avenue to reduce the resource curse, as it dampens oil rents. Again, we find that, oil rents reduce financial development. Our results show that trade environment (foreign direct investment, trade openness and global ease of doing business index) tend to have a resource blessing for financial development. We find that oil rents and trade environment have a substitutability effect rather than a complementarity effect on financial development. We find evidence to support that oil rents further reduce financial sector development when the levels of trade indicators increase. Based on the marginal effect, we conclude that at an increasing level of trade, the negative impacts of oil rents on financial development is further reduced in countries with strong institutional environment compared to those in weak institutional environment.

A dual risk perspective of China's resources market: Geopolitical risk and political risk

Currently, literature is exploring the factors affecting the economic growth of countries and regions. However, there is still a gap in empirical research regarding the connection between risk factors, natural resources, and economic growth, particularly in emerging economies. This study examines the influence of geopolitical risk, political risk, natural resources, and exports on China's economic development during 1983–2021. The Bayer-Hanck combined cointegration results verified the cointegration association between the variables. Using a novel method of movement quantile regression, this study found that geopolitical risk, mineral rents, and exports are positive, while political risk and oil rents adversely affect China's economic growth. These results are robust and consistent as validated by parametric (dynamic ordinary least square, canonical cointegration regression, and fully modified ordinary least square) and non-parametric (bootstrap quantile regression and simple quantile regression) estimators. Based on the empirical results, this study suggested lowering the risk factors and efficiently exploiting and utilizing natural resources for sustainable development.

Analyzing the symmetric and asymmetric effects of disaggregate natural resources on the ecological footprint in Saudi Arabia: insights from the dynamic ARDL approach.

The present study examines the symmetric and asymmetric effects of natural resource exploitation on the ecological footprint in Saudi Arabia during the period 1981-2018. The analysis is performed for total natural resources and different types of natural resources, including oil, natural gas, and minerals. This research employs the dynamic Autoregressive Distributed Lag (DYNARDL) simulation approach. In addition to its statistical and computational superiority, the DYNARDL allows assessing the environmental repercussions of shocks that occurred on natural resources in both the short- and long-run. The findings suggest that total, oil, and natural gas rents have a positive symmetric association with the ecological footprint in the long run, while no significant impact is identified for mineral resources. When conducting the asymmetric analysis, the findings reveal that only increases in total, oil, and natural gas rents deteriorate the ecological footprint in the long run, while no effects are confirmed for decreases in natural resource rents. The shock analysis reveals that a 10% increase in total and oil rents leads to environmental degradation by 3% in the long run, while a similar upsurge in natural gas rents induces a 4% deterioration in environmental quality. These findings may help design effective resource-use policies to achieve environmental sustainability in Saudi Arabia.

Riding the Waves of Fluctuating Oil Prices: Decoding the Impact on Economic Growth

Oil price fluctuations have always been controversial and remain significant in how a country's economy develops. It is especially easy for the worldwide price of natural resources to fluctuate, putting developing nations at risk of economic instability. Consider Pakistan's economy, which is very sensitive to changes in oil prices due to its reliance on the commodity. This research analyses the effects of oil prices on several macroeconomic indicators, including inflation, imports, gross savings, domestic lending to the private sector (DCPS), and industrial value-added in Pakistan. The study uses an error-correcting framework known as autoregressive distributed lag (ARDL) modelling to examine long-term connections between variables and their short-term implications. Additionally, data acquired between 1970 and 2020 was analyzed using Granger causality tests, impulse response functions (IRFs), and variance decomposition analyses (VDAs). The study found that inflation and domestic loans to the private sector hampered economic development in the near run. Conversely, imports, gross savings, industrial value added, and oil rents have a positive effect. A long-term connection between these variables was verified using the boundaries test. A unidirectional link was found in the causality tests between economic growth and imports, inflation and economic growth, and gross saving and domestic credit. An inverse link between domestic credit and inflation was found. The effect of oil rents on economic development in Pakistan is expected to rise during the next four years, according to the forecasts, before levelling out. According to the VDA results, the most critical factor influencing Pakistan's economic development over the next decade would be domestic lending to the private sector. Following these empirical results, the study proposes policy adjustments that might help Pakistan's economy expand more quickly and sustainably.

Revisiting resources allocation for slow-moving economies: A way forward for low-income economies

There is an excess of studies considering the sustainable usage of natural resource rents and economic growth nexus in developed and emerging economies. However, sustainable natural resources-economic growth nexus with environmental factors in low-income economies are lacking. This study contributes to the literature by examining the impact of natural resources (oil and natural gas rents), carbon emissions, and renewable electricity on the economic growth of low-income economies from 1984 to 2021. The study used simplified time series data methods such as unit root tests and a novel MMQR approach. The empirical findings indicate a divided effect of natural resources; oil rents decrease economic growth, while natural gas helps improve low-income economies' economic growth. Furthermore, carbon emissions increased during the period because of the resource curse in the economy and the inefficient extraction of natural resources. Renewable electricity is also found to have a negative and significant impact on economic growth because of the hindrance of shifting the economy towards renewable energy from non-renewable energy. Moreover, the bi-directional causal association is found with the economic performance of low-income economies. Based on the study's empirical findings, the paper offers various policy implications for the policy makers in the situation of low-income economies.

Revisiting resources, cleaner energy and sustainable economic performance: the role of cleaner electricity from BRICS economies

Since the last three decades, the natural resources and energy sector has been regarded as a substantial determinant of economic growth and prosperity. However, the literature is still contradictory and scant for BRICS economies and needs more empirical evidence for appropriate policies. This study aims to analyze the influence of natural resources and cleaner energy on economic performance in the presence of consumption expenditure. Using second-generation diagnostic, unit root, and cointegration tests, the results verify the long-run equilibrium association between the variables during 1990-2021. Due to non-linear data dispersion, the study uses the method of moment quantile regression. It concludes that both natural resources and cleaner energy have an asymmetric influence on the economic growth of these nations. The region’s significant factors of economic growth are electricity production from renewable sources and oil rents. Renewable electricity output and mineral rents adversely affect economic growth and performance. Besides, consumption expenditure is also negatively and significantly affecting economic growth. Based on the empirical outcomes, this study also suggested policies that could benefit the BRICS economic growth and performance.

The lure of oil rents and the lack of innovation: Barriers to the roll-out of renewable energy in oil-rich MENA countries

This study contributes to a thorough understanding of the interactions between oil rents, innovation and renewable energy generation in 8 oil-rich MENA countries over the period 1996–2020 using Pedroni's panel cointegration tests, panel fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) estimators, and panel Granger causality tests. The main results emphasize that without innovation and good governance, it is difficult to envision real progress in the transition to renewable energy in oil-rich MENA countries. Oil rents exhibit a negative effect on renewable energy generation in MENA oil exporters and non-GCC countries, but in contrast they appear to positively and significantly affect renewable energy generation in the GCC countries. The joint impact of good governance and oil revenues turns out to be undeniably crucial in promoting renewable energy production in the three groups of countries. It is incumbent upon policy makers and relevant authorities in MENA oil-exporting countries to start in earnest to demonstrate their commitment to developing renewable energy sources by allocating a significant and acceptable portion of oil revenues to create a budget wholly devoted to unleashing renewable energy innovation.

Resource curse and growth challenges in MENA oil exporter countries: A case for governance reforms in the post Arab Spring uprisings context

AbstractIn the theoretical backdrop of the resource curse problems confronting the resource‐rich countries, this paper, primarily examines the impact of oil rents on economic growth and the related resource curse symptoms in Middle East and North Africa (MENA) oil exporter countries. The existence of and too much dependence on natural resources prevents many oil, gas, and mineral‐rich nations from reaping their full growth potential. They are generally less stable economically, more autocratic, and more vulnerable to conflicts than countries without these resources. The paper then critically discusses the role of governance in averting the resource curse problems by adopting oil rents throughout the pre and post Arab Spring revolution during 1996–2019 as an economic tool for diversification. We apply the fixed‐effects model and the pooled ordinary least squares (OLS) estimations, in addition to the generalized estimating equations (GEE). It is found that oil rents have a positive impact on the growth of MENA countries, posing serious resource curse challenges in the emerging context. While diversification through governance plays an important role, oil rents hamper economic diversification leading to rent‐seeking activities. The results of the paper provide important policy implications for oil exporting counties in the MENA region.

Oil dependency, political institutions, and urban–rural disparities in access to electricity in Africa

AbstractIn line with the resource curse literature, this paper examines the effect of oil dependency on the disparities in access to electricity between urban and rural areas in Africa, conditional on the quality of political institutions. Based on data from 36 African countries over the period 2000–2017, our investigation suggests that oil rents (% of GDP) increase urban–rural disparities in access to electricity. However, the quality of institutions shapes the effect of oil dependency on these disparities. Specifically, a 10% increase in the institutional quality score reduces the adverse effects of oil rent on electricity access disparity by around 19%, and the negative impact of oil dependency on urban–rural disparities is reversed when institutional quality reaches a score of 52% on a scale from 0 to 100. The robustness tests support these results and call for strengthening the quality of institutions to overcome the resource curse in Africa.

Modeling the time-varying effects of oil rent on manufacturing: implications from structural changes using Markov-switching model.

Previous "oil curse" studies primarily estimate a single, linear effect of oil rents on income using time-invariant parameters over entire sample periods. This means the true effects of oil dependence cannot be captured if structural changes are taking place, or effects are non-linear. We introduce a two regime Markov-switching model into the resource effects literature to assess the time-varying effects of oil rent dependence on the Malaysian manufacturing sector. We also allow for non-linear threshold effects. We find the impact of oil rents is regime-dependent. Under a rarer "first regime" structure, there is no significant effect. Under a predominant "second regime," there is an inverted U-shaped effect, with oil rents' share of GDP up to 8% positively associated with manufacturing, and negatively associated beyond this. We find connections between regime changes and the 1997 Asian financial crisis and 2008 global financial crisis. Implications for effective diversification policies are discussed.

Building Angola: A Political Economy of Infrastructure Contractors in Post-War Angola

Following the end of the civil war in 2002, Angola entered a period of political stability and economic growth that was sustained until the oil-price crisis hit the economy in 2015. During this period a vast reconstruction plan of economic infrastructure was implemented. This process induced a series of changes that shaped the construction industry in the country, especially the rise of Angolan contractors as a by-product of the primarily externally funded reconstruction effort. This article aims to understand the political economy of infrastructure building in Angola’s post-war reconstruction boom and the post-2015 crisis. We focus on the nature and dynamics of the emerging infrastructure market segmentation that led to the coexistence of Angolan, Chinese and other foreign contractors, when a part of oil rents was reinvested in infrastructure development, thereby generating a rapid development of the construction sector and its ancillary economic activities. The article explains the origins of segmentation among infrastructure contractors and the central role of oil-backed finance, particularly from China, during the boom and the crisis. It demonstrates the political imperatives of fast delivery of infrastructure assets for the maintenance of the dominant political settlement and the distribution of organisational power in Angola, which led to the rise of a well-organised element of state-linked Angolan capital in this lucrative sector. These experiences reflect the centrality of market segmentation and state–business relations in the evolution of the infrastructure sector in Angola, and the implications for the rise and consolidation of domestic capitalist interests.

Neighborhood Effect, Agricultural Development and Poverty Level in Nigeria

The study seeks to evaluate the role of agricultural development on poverty level and ascertain whether neighbouring countries have any influence on the relation between agricultural development and poverty level in Nigeria. Annual data covering the period between 1980 and 2019 were employed. Fully Modified Ordinary Least Square (FMOLS), Canonical Cointegrating Regression (CCR) and spatial econometrics were employed. Our results showed that agricultural development is capable of reducing poverty level in the country, while there was no significant effect of spatial factors on the relationship between agricultural development and poverty level in Nigeria between 1980 and 2019. The study therefore recommends that the government should pay more attention towards improvement of agriculture, transportation and oil rent which are capable of complementing each other in reducing poverty in Nigeria.

The International Oil Rent in the National Oil-Exporting Economies

This article aims to present an analysis of both the causes of the oil rents in the global oil market and an alternative approach to recording the growth in national oil-exporting economies. In addition, the article also offers an overview of the Rent Capitalism Economic Theory as a peculiar economic development model, delivering an illustration based on the Venezuela System of National Account (1997 - 2014). Calculations of the International Oil Rent as a separate part of the national income serve to understand the performance of national oil-exporting economies. Finally, the article also proposes four indicators to measure the performance of such economies: Oil Sector Non-Rent GDP, Non-Oil Sector Non-Rent GDP, Non-Rent Total GDP and International Oil Rent.

The background of political leaders and capital flight: Evidence from Africa,

In studies of government and economics, an important issue is the relationship between the background of political leaders and economic performance. The aim of this paper is to empirically study the relationship between the background of political leaders and capital flight in Africa. Using a sample of 38 African countries from 2008 to 2018, we find that political horizon, the age and the profession of the political leaders stimulate capital flight, using Driscoll-Kraay methods, 2SLS and MLLI. Oil rent and corruption are the transmission channels that amplify the nature of the tenure-capital flight relationship. The results also highlight the existence of an inverted U-shaped relationship between political tenure and capital flight. On the other hand, high educated leaders, i.e. those with a master's degree and/or doctorate (HEL), contain the malaise; especially in oil-producing countries. It follows that in order to curb capital flight, it would be advisable to set up electoral laws that would perpetuate the accession to power of high educated leaders.

The Arab Countries of the Persian Gulf as “New Donors” in the World Economy

This article deals with the peculiarities and aspects of foreign aid by Arab countries of the Gulf (Cooperation Council for the Arab States of the Gulf (GCC members)). Relatively recently, almost all the countries that are members of the integration association GCC were countries with extremely backward consumer economy. But with the discovery of the richest oil deposits, this region has become the main oil-bearing region of the world. During the so-called “oil boom”, the economy of the Arab countries of the Gulf was at the initial stage of development and was not able to invest the growing revenues from oil rents in national projects, so free financial resources were used to create development funds and provide assistance. Now two countries – Saudi Arabia and the United Arab Emirates – are among the top 20 donor-states in terms of funding, are very influential participants in international development assistance processes and play a leading role in international humanitarian activities. The directions and geography of assistance are quite extensive and diverse, and the amount of funds allocated is solid. For these States, humanitarian assistance is a priority direction of foreign policy and contributes to increasing prestige in the international arena in order to ensure national interests.

Factors involved in Economic Development and their Impact on State-Building in Malaysia

The successful history of poverty elimination and impressive economic development in Malaysia for the post-colonial period regarded a worth model for growth in developing world. The question raised in this achievement was; how economic development affected on the state-building in the country? Therefore, the motive of the study is to examine the determinants of economic development on state-building. Autoregressive distributed lag (ARDL) model employed to test economic factors affecting the state-building. The study covered data spanning from 1970-2017. The long-run co-integration in the model has confirmed, and econometric diagnostic tests are robust. The study findings show that human capital, oil rent, and per capita income, positively and significantly affect state-building in the long-run. In the short-run, human capital and oil revenue effects positively and significant. Population growth, democracy, inflation, and financial development have confirmed a negative and significant impact on state-building. Policy implication has highlighted the importance of human capital development, macroeconomic stability, and population growth in Malaysia's state-building. Demographic transition exerts a considerable negative effect on state-building in the long-run, affecting the economic health and steady-state growth. Financial development inserting a negative impact on state-building to promote development. The study recommended that the economic policymakers and relevant bureaucracies correct the fiscal deficit and ease domestic financial institutions into the credits based on the findings. Malaysia is facing a demographic threat in the long run due to the aging population and low fertility rate; therefore, it have to re-address the population policy.

Towards Sustainability, Can Higher Oil Rents Increase Renewable Energy Consumption? And Can higher Oil Prices and Taxes on Investments Increase Renewable Energy Investment?

Sustainable development is attracting great attention from economists lately looking at it as a way to minimize capital depletion and to make it accessible to the global present and future population. The concept of sustainable development embraces the importance of sustaining the world's resources while trying to harmonize the relationship between humans' behavior and activities and the natural environment. This entitles changing the ways and methods of how producers develop and use productive technologies; how and what goods and services consumers demand; and how governments, local authorities, NGOs and any other relevant players plan and act in the economy. Energy is a factor that contributes to making our world habitable. It is deemed one of the most important factors of life on earth. In particular, the world's energy use is made up of 80% of fossil fuels, or what is known as non-renewable energies. Fossil fuels are coal, petroleum, and natural gas. As a result, the world is pretty much non-renewable energy-dependent and unsustainable. Non-renewable energy sources, are resources hoped to be gained from wars, conflicts, and power disputes. In addition to conflicts, the problem that dominates the public discussion on non-renewable energy is climate change. Inflation is another con of non-renewable energy dependence: surging energy costs have boosted inflation, especially in Europe, after fossil-fuel prices nearly doubled in 2021, and as a consequence of the Russian Ukrainian conflict, oil prices hit a 14-year high, Global oil prices have spiked about 60% since the start of 2022, raising concerns about global economic growth and stagflation. Keywords: Sustainability; Renewable energy; Oil rents; Oil prices; Policy.

Do Oil Rents Affect Unemployment Rates in Net Oil Exporting African Countries?

Do Oil Rents Affect Unemployment Rates in Net Oil Exporting African Countries?