The Gulf Cooperation Council (GCC) countries own 30 percent of the world’s proven oil reserves and largely depend on oil for their income. Yet the GCC faces serious challenges. The global demand for oil is expected to continue declining, and the average long-run oil price could become lower than its historical average in the future. This book is a research-based, structural macroeconomic analysis, providing evidence-based and future-facing policy recommendations for GCC governments.
First, it analyzes historical data to explain the macroeconomic performance and economic policies of the GCC countries from 1970 to 2019. Then it presents ten-year dynamic stochastic projections from 2020 to 2030. The book examines debt sustainability and optimal fiscal policies – i.e., government spending and taxation. It also analyses structural issues, such as savings and productivity, from an institutional perspective, taking into account education, the labor market, and pension funds, as well as other factors that have a close effect on economic performance. The book is comprehensive and thorough, it relies on extensive econometric analyses, including rigorous time series analysis. The author uses both calibration of theoretical models and estimation, facilitating projections for the next decade of key economic variables under different policy scenarios. The book also assesses what the future of the GCC economies will look like if climate change and the COVID-19 pandemic continue to adversely affect oil supply and demand and the price of oil, given their current policies and institutions.
As well as scholars and researchers of economics and finance, the book will engage policymakers in central banks, treasury departments, planning councils, research institutes, and think tanks.
Author(s): Weshah Razzak
Series: Routledge Studies in the Modern World Economy
Publisher: Routledge
Year: 2022
Language: English
Pages: 180
City: London
Cover
Half Title
Series
Title
Copyright
Contents
List of Figures
List of Tables
Preface
1 Introduction
2 Some Stylized Facts
Oil Revenues Dominate
Large Shares of Services
Inefficiency
Declining Marginal Productivity of Labor and Capital
Real Depreciation of the Currency
High Oil Rent
Small Shares of Agriculture
Oil Prices, Domestic Prices, and GDP Highly Correlated
Revenues and Oil Prices Highly Correlated
High Oil Breakeven Prices
Government Expenditures and Oil Prices Highly Correlated
Savings and Oil Prices Highly Correlated
Private Investments, Private Capital Stock, and Oil Prices Correlated
Net Exports and Oil Prices Highly Correlated
External Debt and Oil Prices Negatively Correlated
Young Population
High Literacy Rates, Low-Quality Human Capital, and High Female Achievements
Very Large Foreign Labor Force
High Youth Unemployment Rates
Symmetrical Exogenous Shocks
Monetary Policy Not Independent
Absolute Monarchies
3 The Oil Dependency Dilemma
Estimating the Share of Oil in Real Output
Oil Production – Global Oil Consumption Relationship in the Long Run
The Short-Run Dynamic Relationship and Stress Tests
Technical Appendix 3.1: The VAR
Technical Appendix 3.2: The Solver
Appendix 3.3: The Estimated SVARs
4 The External Debt
The Debt Stylized Facts
Economic Theories
Computing the Fiscal Adjustment Needed to Achieve a Sustainable Debt Target
Appendix 4.1: U.S. Debt Uncorrelated With Real Macroeconomic Variables
Technical Appendix 4.2: Sustainable Debt
5 Is the Level of Government Spending Optimal?
The Growth Model
The Empirical Results of Estimating the Growth Equation
The Current Account Equation
Appendix 5.1: Government Spending Does Not Crowd Out Private Investments
6 Can Taxes Resolve the Economic Problems?
The Model
Empirical Evidence
Appendix 6.1: The Estimated SVAR Without Income Tax
7 Savings, Productivity, and Other Structural Issues
A Case for Personal “Household” Saving
Productivity
Other Research Issues Pertinent to Saving and Productivity
8 Final Remarks
References
Index
