oil, volatility and institutions: cross country evidence from major oil producers - kamiar mohaddes

Oil, Volatility and Institutions: CrossCountry Evidence from Major Oil Producers

Amany El-Anshasy (UAEU and ERF), Kamiar Mohaddes(Cambridge and ERF), and Jeffrey B. Nugent (USC and ERF)

Monetary and Fiscal Institutionsin Resource-Rich Arab Economies

November 4, 2015

Motivation

I According to the resource curse paradox, abundance of oil (natural gas,minerals and other non-renewable resources) is believed to be animportant determinant of economic failure.

I We investigate whether the poor performance of resource-rich countries,when compared to countries which are not endowed with oil, is due to theabundance of oil in itself or whether instead the curse is due to pricevolatility in global oil markets and production volatility due to politicalfactors (for instance, wars, and sanctions).

I More importantly, we try to establish whether there is a role forinstitutions and the government (fiscal policy) in offsetting some of thenegative growth effects due to the curse.

Literature

I There are different explanations for why resource-rich economies might besubject to a curse, for instance, the Dutch disease (see Corden andNeary 1982, Neary and van Wijnbergen 1986, and Krugman 1987).

I Other explanations focus on the political economy considerations andargues that large windfalls from oil and other resources create incentivesfor the rent-seeking activities that involve corruption (Mauro 1995 andLeite and Weidmann 1999), voracity (Lane and Tornell 1996 and Tornelland Lane 1999), and possibly civil conflicts (Collier and Hoeffl er, 2004).

I Some of these considerations have been recently formalized by Caselli andCunningham (2009), with a recent survey provided in van der Ploeg andVenables (2009).

Literature II

I A number of recent empirical works have also focused on the role ofinstitutions.

I Mehlum et al. (2006) and Béland and Tiagi (2009), using across-sectional approach, show that the impact of natural resources ongrowth and development depends primarily on institutions.

I While Boschini et al. (2007) illustrate that the type of natural resourcespossessed is also an important factor.

I These authors argue that, when one controls for institutional quality andincludes an interaction term between institutional quality and resourceabundance, a threshold effect arises. This suggests there are levels ofinstitutional quality above which resource abundance becomes growthenhancing.

Literature III

I Empirical support for the resource curse was originally provided by Sachsand Warner (1995), but there are a number of reasons why theeconometric evidence on the negative effects of resource abundance onoutput growth might be questioned.

I Firstly, the literature relies primarily on a cross-sectional approach totest the resource curse hypothesis, and as such does not fully take accountof the time dimension of the data and could suffer from endogeneity andomitted variable problems, For example, Alexeev and Conrad (2009) showevidence against the resource curse hypothesis by considering a fewadditional regressors, such as exogenous geographical factors.

I In addition, even when panel data techniques are used, most studiesmake use of homogeneous panel data models, such as fixed andrandom effects estimators, the instrumental variable (IV) technique, andthe generalized methods of moments model, among others.

Literature IV

I As discussed in Pesaran and Smith (1995), the problem with thesedynamic homogenous panel data techniques, when applied to testinggrowth effects, is that they can produce inconsistent and potentiallyvery misleading estimates of the average values of the parameters, sincegrowth regressions typically exhibit a substantial degree of cross-sectionalheterogeneity.

I Note also that the early analysis ignores the effects of oil revenuevolatility on growth, which turns out to be important.

I Accounting for (some of) these shortcomings and using appropriateeconometric techniques, the recent empirical literature seems to provideevidence against the conventional resource curse literature and arguesfor the positive effect of resource abundance on development and growth,see for instance Arezki and van der Ploeg (2007), Cavalcanti et al.(2011b, 2014), and Esfahani et al. (2013, 2014).

Contributions

I Using annual (and monthly) data on a sample of major oil producers overthe period 1961—2013, we study the long-run effects of oil revenue and itsvolatility (an annual country-specific measure of revenue volatility) oneconomic growth under varying institutional quality.

I In contrast to the earlier literature on the resource curse we take intoaccount all three key features of the panel: dynamics, heterogeneity andcross-sectional dependence.

I We argue that volatility in oil revenues combined with poor governmentalresponses to this volatility drives the resource curse paradox, not theabundance of oil revenues as such.

Scatter Plots of Oil Revenue Growth against GDP andTFP Growth Rates, 1961-2013

1.5

0.5

1G

DP

Gro

wth

2 1 0 1 2 3Oil Revenue Growth

Oil Producers

1.5

0.5

1G

DP

Gro

wth

2 1 0 1 2Oil Revenue Growth

MENA Oil Producers

1.5

0.5

TFP

Gro

wth

2 1 0 1 2 3Oil Revenue Growth

Oil Producers

1.5

0.5

TFP

Gro

wth

2 1 0 1 2Oil Revenue Growth

MENA Oil Producers

Source: Authors’calculation based on data from World Bank World DevelopmentIndicators (WDI), Penn World Table Version 8.0, and International Monetary FundInternational Financial Statistics databases.

Scatter Plots of GDP Growth and Volatility of Oil RevenueGrowth against Volatility of GDP Growth, 1961-2013

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Realized Volatility of Oil Prices, Production, and Revenues,1961—2013

0.5

11.

52

1960 1970 1980 1990 2000 2010Year

Realized Oil Price Volatility Realized Oil Production VolatilityRealized Oil Revenue Volatility

Iran

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1960 1970 1980 1990 2000 2010Year

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Scatter Plots of Realized Oil Revenue Volatility againstGDP and TFP Growth Rates, 1961-2013

1.5

0.5

1G

DP

Gro

wth

0 1 2 3 4Realized Oil Revenue Volatility

Oil Producers

1.5

0.5

1G

DP

Gro

wth


MENA Oil Producers

1.5

0.5

TFP

Gro

wth


Oil Producers

1.5

0.5

TFP

Gro

wth


MENA Oil Producers


Estimates of the Long-Run Effects of Oil Revenue and OilRevenue Volatility on GDP Growth, 1961-2013

(a) Based on the ARDL Approach

ARDL (1 lag) ARDL (2 lags) ARDL (3 lags)MG PMG MG PMG MG PMG

θ̂∆oil 0.139∗∗∗ 0.101∗∗∗ 0.138∗∗∗ 0.133∗∗∗ 0.106∗∗∗ 0.085∗∗∗(0.029) (0.010) (0.028) (0.013) (0.037) (0.015)

θ̂σ -0.064∗∗∗ -0.057∗∗∗ -0.057∗∗∗ -0.069∗∗∗ -0.050∗ -0.041∗∗(0.014) (0.010) (0.013) (0.011) (0.026) (0.016)

N × T 721 721 703 703 685 685

(b) Based on the Cross-Sectionally Augmented ARDL (CS-ARDL) Approach

CS-ARDL (1 lag) CS-ARDL (2 lags) CS-ARDL (3 lags)MG PMG MG PMG MG PMG

θ̂∆oil 0.221∗∗∗ 0.235∗∗∗ 0.199∗∗∗ 0.207∗∗∗ 0.243∗∗∗ 0.326∗∗∗(0.062) (0.021) (0.062) (0.019) (0.062) (0.039)

θ̂σ -0.036∗∗∗ -0.057∗∗∗ -0.025∗ -0.065∗∗∗ -0.027 -0.028∗(0.009) (0.010) (0.013) (0.009) (0.037) (0.016)

N × T 715 715 700 700 685 685

Notes: The dependant variable is the growth rate of real GDP. θ̂∆oil is the coeffi cient of the growth rate of real oilrevenue (oilit ) and θ̂σ is the coeffi cient of the realized volatility of oil revenues (σoilit ). Symbols

∗∗∗ , ∗∗ , and ∗denote significance at 1%, 5%, and at 10% respectively.

Estimates of the Long-Run Effects of Oil Revenue and OilRevenue Volatility on TFP Growth, 1961-2013

1 lag 2 lags 3 lagsARDL CS-ARDL ARDL CS-ARDL ARDL CS-ARDL

θ̂∆oil 0.053∗∗∗ 0.090∗∗∗ 0.054∗∗∗ 0.129∗∗∗ 0.008 0.119∗∗∗(0.009) (0.012) (0.011) (0.015) (0.013) (0.019)

θ̂σ -0.028∗∗∗ -0.025∗∗∗ -0.037∗∗∗ -0.042∗∗∗ -0.029∗∗ -0.045∗∗∗(0.007) (0.006) (0.012) (0.008) (0.014) (0.011)

N × T 501 495 488 485 475 475

The dependant variable is the growth rate of real TFP. θ̂∆oil is the coeffi cient of the growth rate of real oil revenue(oilit ) and θ̂σ is the coeffi cient of the realized volatility of oil revenues (σoilit ). Symbols ***, **, and * denotesignificance at 1%, 5%, and at 10% respectively.

Scatter Plots of GDP Growth Volatility against FiscalPolicy Volatility, 1961-2013

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BrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChile

EcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexico

PeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeru VenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrain

IranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIranIran

IraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraqIraq

JordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordan

KuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwait

LebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanon

OmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOman

QatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudi

YemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemen

SyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyria UAEUAEUAEUAEUAEUAEUAEUAEUAEUAEUAE

EgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesia

AlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeria

AngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngola

BotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswana LibyaLibyaLibyaLibyaLibyaLibyaLibyaLibyaLibyaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritaniaMauritania

MoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMorocco

NigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeriaNigeria

SudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudan

TunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisia

AzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijan

KazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChina

0.0

5.1

.15

.2.2

5G

DP

Gro

wth

Vol

atilit

y

0 .1 .2 .3 .4Fiscal Policy Volatility

Primary Commodity Exporters

Source: Authors’calculation based on data from World Bank World DevelopmentIndicators (WDI), Penn World Table Version 8.0, and International Monetary FundInternational Financial Statistics and World Economic Outlook databases. These arecross-sectional averages over 1961-2013.

Scatter Plots of Institutional Quality against Fiscal PolicyVolatility, 1961-2013

USAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUKUK

NorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorway

CanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanadaCanada

TurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkeyTurkey

AustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaAustraliaNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew ZealandNew Zealand

South AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth Africa ArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaArgentinaBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazilBrazil

ChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChileChile

EcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuador

MexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexico

PeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeruPeru

VenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuela

Trinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and TobagoTrinidad and Tobago

BahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrain



JordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordanJordan

KuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwaitKuwait

LebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanon

OmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanOmanQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarQatarSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudiSaudi

YemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemenYemen

SyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyriaSyria

UAEUAEUAEUAEUAEUAEUAEUAEUAEUAEUAE

EgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgyptEgypt IndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaIndonesiaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeriaAlgeria

AngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngolaAngola

BotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswanaBotswana LibyaLibyaLibyaLibyaLibyaLibyaLibyaLibyaLibya

MoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMoroccoMorocco


SudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudanSudan

TunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaTunisiaAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijanAzerbaijan

KazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstanKazakhstan

RussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussiaRussia

ChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChinaChina

4050

6070

8090

Inst

itutio

nal Q

ualit

y


Primary Commodity Exporters

USAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSAUSA

NorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorwayNorway

EcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuadorEcuador

MexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexicoMexico

VenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuelaVenezuela

BahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrainBahrain



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4050

6070

8090

Inst

itutio

nal Q

ualit

y


Oil Producers

Source: Authors’calculation based on data from World Bank World DevelopmentIndicators (WDI), Political Risk Services Group, Penn World Table Version 8.0, andInternational Monetary Fund International Financial Statistics and World EconomicOutlook databases. These are cross-sectional averages over 1961-2013.

Long-Run Effects of Oil Revenue, Oil Revenue Volatility,and Institutional Quality on GDP Growth, 1984-2012

(a) Based on the ARDL Approach

ARDL (1 lag) ARDL (2 lags) ARDL (3 lags)MG PMG MG PMG MG PMG

θ̂σ -0.201∗∗∗ -0.227∗∗∗ -0.177∗∗ -0.122∗∗∗ -0.157∗ -0.201∗∗∗(0.057) (0.043) (0.077) (0.036) (0.081) (0.025)

γ̂ 0.002∗∗ 0.002∗∗∗ 0.002∗ 0.001∗ 0.003∗ 0.002∗∗∗(0.001) (0.000) (0.001) (0.000) (0.001) (0.001)

N × T 486 486 485 485 484 484

(b) Based on the Cross-Sectionally Augmented ARDL (CS-ARDL) Approach

CS-ARDL (1 lag) CS-ARDL (2 lags) CS-ARDL (3 lags)MG PMG MG PMG MG PMG

θ̂σ -0.307∗∗∗ -0.261∗∗∗ -0.223∗∗∗ -0.163∗∗∗ -0.215 -0.150∗∗∗(0.088) (0.049) (0.074) (0.029) (0.337) (0.028)

γ̂ 0.004∗∗∗ 0.002∗∗∗ 0.004∗∗ 0.002∗∗∗ 0.005∗∗ 0.002∗∗∗(0.001) (0.000) (0.002) (0.001) (0.002) (0.000)

N × T 486 486 485 485 484 484

Notes: The dependant variable is the growth rate of real GDP. θ̂σ is the coeffi cient of the realized volatility of oilrevenues (σoilit ) and γ̂ is the coeffi cient of institutional quality (Iit ). Symbols ***, **, and * denote significance at1%, 5%, and at 10% respectively.

Concluding RemarksI Although the early literature showed the existence of a negativerelationship between real GDP per capita growth and resource/oilabundance, more recent evidence is not so clear cut.

I Using appropriate econometric techniques that take into account all threekey features of the panel (dynamics, heterogeneity and cross-sectionaldependence), we provided evidence for the positive long-run effect of oilrevenue on growth, with oil revenue volatility affecting growth negatively(due to, for instance, large swings in government expenditure).

I We, therefore, argue that it is the volatility in oil revenue and thegovernment’s inappropriate economic and political responses to thesevolatilities that are the curse and not the abundance of revenues from oilproduction/exports in itself.

I Seen from this perspective, oil revenue can be both a blessing and a curse,and the overall outcome very much depends on the way the negativeeffects of oil revenue volatility are countered by use of suitable policymechanisms that smooth out the flow of government expenses over time.

Concluding Remarks II

I Norway’s experience suggests that it might be possible within ademocratic political system with good institutions and an accountablegovernment to avoid some of the undesirable consequences of oil revenuevolatility.

I The Norwegian Government Pension Fund, which aims to managepetroleum revenues in the long term is an example of how a stabilizationand sovereign wealth fund can help offset not only the volatility of oilrevenues but also help to smooth out government expenditures.

I Therefore, the undesirable consequences of oil revenue volatility can beavoided if resource-rich countries are able to improve the management ofvolatility in resource income by setting up forward-looking institutionswith the aim of saving when commodity prices are high and spendingaccumulated revenues when prices are low.

Concluding Remarks III

I The government can also intervene in the economy by increasing publiccapital expenditure when private investment is low, using proceeds fromthe stabilization fund.

I Alternatively the government can use these funds to increase thecomplementarities of physical and human capital, such as improving thejudicial system, property rights, and human capital.

I This would increase the returns on investment with positive effects oncapital accumulation, TFP, and growth.

I Improving the functioning of financial markets is also a crucial step as thisallows firms and households to insure against shocks, decreasinguncertainty and therefore mitigating the negative effects of volatility oninvestment and economic growth.

Additional Slides

Impact of a Negative Oil Revenue Shock for OPECCountries (Mohaddes and Raissi, 2015)

Notes: Figures are median generalized impulse responses to a one standard deviationfall in oil revenue, together with 95 percent bootstrapped confidence bounds. Theimpact is in percentage points and the horizon is quarterly.

External Income and Price of Oil, in Log Level (Mohaddesand Raissi, 2015)

4.0

5.0

6.0

7.0

8.0

1979Q2 1987Q1 1994Q4 2002Q3 2009Q42.0

3.0

4.0

5.0

External income Price of oil

Sources: Authors’construction based on data from International Monetary FundBoPS and IFS.

Impact of a Negative Oil Price Shock (Mohaddes andRaissi, 2015)

Notes: Figures are median generalized impulse responses to a one standarddeviation fall in oil prices, together with 95 percent bootstrapped confidencebounds. The impact is in percentage points and the horizon is quarterly.

Impact of the U.S. Oil Supply Revolution on Real Output(Mohaddes and Raissi, 2015)

Notes: Figures are median (blue solid) and median target (black long-dashed) impulseresponses to a one standard deviation fall in the price of oil, equivalent to anannualized drop of 51% in year 1 and 45% in year 2, together with the 5th and 95thpercentile error bands. The impact is in percentage points and the horizon is quarterly.

Impact of the U.S. Oil Supply Revolution on Real Outputin the MENA Region (Mohaddes and Raissi, 2015)

Notes: Figures are median target impulse responses to a one standard deviation fall inthe price of oil, equivalent to an annualized drop of 51% in year 1 and 45% in year 2.The impact is in percentage points and the horizon is quarterly.

Fiscal Break-Even Prices for Major Oil Exporters (U.S.dollars/barrel)

Country Break-even Country Break-even Country Break-evenprices prices prices

Algeria $111.10 Libya $215.00 Saudi Arabia $103.00Iran $92.50 Nigeria $87.90 U.A.E. $73.10Iraq $70.90 Qatar $59.10 Venezuela $89.00Kuwait $47.10 Russia $78.00

oil, volatility and institutions: cross country evidence from major oil producers - kamiar mohaddes

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