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The impact of oil revenues on the I ranian economy and the G ulf states
Author(s) -
Dreger Christian,
Rahmani Teymur
Publication year - 2016
Publication title -
opec energy review
Language(s) - English
Resource type - Journals
eISSN - 1753-0237
pISSN - 1753-0229
DOI - 10.1111/opec.12060
Subject(s) - cointegration , economics , revenue , investment (military) , monetary economics , per capita , real gross domestic product , short run , macroeconomics , econometrics , finance , population , demography , sociology , politics , political science , law
Abstract Persistent streams of oil revenues can have a long‐lasting impact on GDP per capita in oil‐exporting countries. Higher revenues might finance government activities and GDP . Besides the direct impact, an indirect effect may occur, as revenues may lead to higher investment that could raise capital accumulation and the production frontier. In this paper, the relationship between poli revenues, GDP and investment is explored for I ran and the countries of the G ulf C ooperation C ouncil ( GCC ). To account for nonstationarities of the variables involved, (panel) cointegration techniques are applied. Several results are drawn from the analysis. Cointegration between oil revenues, GDP and investment can be established for all countries. While the cointegration vector is found to be unique for I ran, long‐run equations for GDP and investment per capita are distinguished for the G ulf countries. While GDP and investment both respond to deviations from the steady state, oil income can be treated as weakly exogenous. The long‐run oil elasticities in tGCC states exceed their I ranian counterparts. While oil revenues are closely related to investment activities in the GCC states, investment in I ran does not react to oil revenues in the long run.