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The data are taken from the WEO database, IMF. Export revenues dropped below 80 percent in the aftermath of the collapse of OPEC in the late 1980s and following the Asian financial crisis in 1998–99.
The data are derived from the BP Statistical Review of World Energy, June 2011.
The dependence on foreign labor is common in the GCC countries. In fact, Saudi Arabia, together with Oman, has the lowest percentage of foreign workers. In Kuwait and Qatar over two-thirds of the population are expatriates (Kapiszewski, 2006).
For instance, portfolio inflows increased substantially when the government began to issue government bonds at the end of the 1980s. The bonds were primarily bought by commercial banks and institutional investors which sold foreign assets to finance their purchases. The opening of the domestic equity market in 1980s had a similar effect. However, the shallow domestic debt market and restrictions on foreign participation in capital markets have likely prevented larger portfolio inflows.
In the 1970s, the government also nationalized the oil sector, taking full control of ARAMCO by 1980.
Although the government has employed a liberal attitude towards international trade and immigration, it has taken a more active role in domestic markets, making extensive use of subsidies and administered prices of commodities (e.g., petroleum products, energy, water, food staples, and agricultural production). For instance, the pricing policy of feedstock to the petrochemical industry has been an important component in the strategy to attract foreign investors. Protecting the agricultural sector has also long been seen as a national security issue although this support is slowly being phased out.
Saudi Arabian Agricultural Fund, Saudi Credit and Savings Bank, Public Investment Fund, Saudi Industrial Development Fund, and the Real Estate Development Fund. The sixth fund was named Contractors Fund, but no longer exists.(Ramady, 2010)
See Tschoegl (2002).
In an interview in 1998 with SPA (Saudi Press Agency), Oil Minister Al-Naimi stated that Saudi Arabia had abandoned the role of swing producer in the 1980s because it had resulted in the loss of both market share and large oil revenues.
Developing Asia includes Afghanistan, Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, India, Indonesia, Kiribati, Lao PDR, Malaysia, Maldives, Myanmar, Nepal, Pakistan, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Timor-Leste, Tonga, Vanuatu, and Vietnam.
The data are de-trended using the Hodrick-Prescott filter.
A simple Chow break-test rejects the null hypothesis that there is no break in the coefficient in 1996.
The assumption is that the oil shock has not originated in Saudi Arabia.
In fact, it was not until 2004 that oil export revenues surpassed the $100 billion dollar mark again.
For instance, Goodfriend and King (2005) claim that Volcker and other members of the Federal Open Market Committee argued that inflationary pressures and expectations were rising in 1979 in the face of the impending oil shortage and urged tighter monetary policy.
This rise may be due to the ramping up in government capital spending and the need for project financing, as large banks are better positioned to finance these projects.
The test is conducted using two lags of the dependent variable. However, the results are robust to three and four lags as well.
Including the oil price makes sense because both credit and non-oil GDP may be heavily influenced by government spending, which in turn is to a large extent driven by oil revenues.