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Oil prices and fiscal policy in an oil-exporter country: empirical evidence from Oman

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Aljabri, S, Raghavan, M ORCID: 0000-0002-4123-5004 and Vespignani, JL ORCID: 0000-0003-0265-4377 2021 , Oil prices and fiscal policy in an oil-exporter country: empirical evidence from Oman.

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Abstract

This paper studies the impact of oil price shocks on fiscal policy and real GDP in Oman using
new unexplored data. We find that an oil price shock explains around 22% and 46% of the variation in
the government revenue and GDP, respectively. Decomposing the government revenue and GDP
further into petroleum and non-petroleum related components, we find that an oil price shock explains
around 26% of the variation in petroleum revenue and 90% of the petroleum-GDP. Though petroleum
and non-petroleum GDP respond positively to oil price shocks, government expenditure is not affected
by oil prices but is affected by government revenue. The results suggest that the Omani government
uses its reserve fund and local and international debt to smooth and reduce the impact of oil price
fluctuations

Item Type: Report (Discussion Paper)
Authors/Creators:Aljabri, S and Raghavan, M and Vespignani, JL
Keywords: oil price shocks, fiscal policy, GDP, SVAR
Publisher: University of Tasmania
Copyright Information:

Copyright 2021 University of Tasmania

Additional Information:

Discussion Paper Series N 2021-04
JEL Classification: C32, E17, E62, N15

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