Oil Revenues and Macroeconomic Instability in Oil-Exporting Countries: A GMM Approach

Abstract

In most of oil exporting countries, oil revenue is considered as one of the main drivers of the economy. These revenues, as the important source of currency, at least, enables the country import various capital goods, intermediaries and consumables and usually covers part of the government's current and development expenditures. However, oil revenues are volatile and uncertain due to the changing nature of the global oil price. This indicate that a significant part of the economy in these countries is exposed to potential instability which is supposed as an anti-growth factor. The present study seeks to examine the effect of oil revenues on inflation and real exchange rate as dominant proxies of macroeconomic stability along with economic growth in oil exporting countries using the GMM method during the 1980 to 2015 period. The results show that oil revenues have different effects on these indicators in selected countries.