Search Results (5)

This article examines how the volatile oil price affected Saudi Arabia’s and the other GCC countries’ fiscal policy dynamics from 2000 and 2024. The region’s fiscal systems are vulnerable to external shocks due to their substantial reliance on petroleum profits, even with ongoing efforts to diversify. The dynamic links between government spending, budget balances and oil prices are examined using a panel vector Autoregression (PVAR) model. We also estimate different fiscal reaction functions for Saudi Arabia and several of its neighbors with somewhat more diversified income systems, like Kuwait and the United Arab Emirates. This study’s primary contribution is its direct comparative analysis of GCC fiscal responses using a long panel (2000–2024) that encompasses major oil price cycles, and the application of a dynamic PVAR framework to quantify the persistence and heterogeneity of these effects across countries. The data shows that different countries have different fiscal responses. For example, Saudi Arabia reacts to oil shocks more slowly than other nations with more diverse revenue sources, who have better consolidation mechanisms. These results highlight the necessity of strong fiscal frameworks that build resilience to fluctuations in commodity prices and offer insightful guidance to policymakers seeking sustainable fiscal management in countries that rely heavily on natural resources. Full article

This study used the panel data from 15 emerging markets to examine the impact of restrictive macroprudential policies on income inequality from 2000–2019 using Bayesian panel vector autoregression and Bayesian panel dynamics generalised method of moments models. The chosen models are suitable for addressing multiple entity dynamics, accommodating a wide range of variables, handling dense parameterisation, and optimising formativeness and heterogeneous individual-specific factors. The empirical analysis utilised various macroprudential policy proxies and income inequality measures. The results show that when the central banks tighten systems using macroprudential policy instruments to sticker debt-to-income and financial instruments for lower-income borrowers (the bottom 40% of the income distribution), they promote income inequality in these countries while reducing income inequality for high-income borrowers (the high 1 percent of the income distribution). The impact of loan-to-value ratios was found to be insignificant in these countries. Fiscal policy through government expenditure and economic development reduces income inequality, while money supply and oil-price shocks exacerbate it. The study suggests implementing a progressive debt-to-income (DTI) ratio system in emerging markets to address income inequality among lower-income borrowers. This would adjust DTI thresholds based on income brackets, allowing lenient credit access for lower-income borrowers while maintaining stricter limits for higher-income borrowers. This would improve financial stability and reduce income disparities. Additionally, targeted financial literacy programs and a petroleum-linked basic income program could be implemented to distribute oil revenue to lower-income households. A monetary supply stabilisation fund could also be established to maintain financial stability and prevent excessive inflation. Full article

The multifaceted interrelationship between petroleum prices and equity markets has been a subject of immense interest. The current paper offers an extensive review of a plethora of empirical studies in this strand of literature. By scrutinising over 190 papers published from 1983 to 2023, our survey reveals various research themes and points to diverse findings that are sector- and country-specific and contingent on employed methodologies, data frequencies, and time horizons. More precisely, petroleum price changes and shocks exert direct or indirect effects dictated by the level of petroleum dependency across sectors and the country’s position as a net petroleum exporter or importer. The interlinkages tend to display a time-varying nature and sensitivity to major market events. In addition, volatility is not solely spilled from petroleum to equity markets; it is also observed to transmit in the reverse direction. The importance of incorporating asymmetries is documented. Lastly, the summarised findings can serve as the basis for further research and reveal valuable insights to market participants. Full article

The outbreak of the COVID-19 disease has gravely shaken the world economy. The economies of many countries have come under severe strain; Nigeria’s petroleum industry has been particularly affected. This has threatened the countries’ budgets and other essential needs involved in citizens’ welfare. The government is taking drastic measures to combat this scourge, with few results. This study adopts a doctrinal legal research approach and considers both the primary and secondary sources of law, such as judicial precedents, international conventions, and peer-reviewed journals. Legal theories were also applied as an academic lens for modelling the research. The justification for using the method was to establish the trustworthiness of the findings on the impacts of crude oil price shock on Nigeria’s economy, its legal and policy options. This study investigates the influences of oil price shock on the country’s economy and the legal remedies required to build economic resilience to mitigate future contingencies. The study argues that the provisions of the extant laws can be utilised as a preventive mechanism for tackling the impacts of oil price shock on Nigeria’s economy. The study recommends other remedial measures, such as diversification from oil and gas to non-oil sectors. The study designed a hybrid model for mitigating the influences of crude oil prices on the country’s extractive wealth. The study advocates for the need for an effective legal regime to shield the domestic economy from international oil price instability. The implications of the main results are that crude oil production and prices play a significant role in real growth enhancement. However, they exert a negative but unsustainable standard innovation on growth, which could be mitigated through appropriate legal and policy options. Nigeria needs stringent, transparent, and the best petroleum management practice laws to manage its petroleum sector’s revenues for sustainability. Full article

Risks associated with climate change can have an injurious impact on the economy as well as the financial system as a whole. There is a possibility that certain risks, such as losses to financial intermediaries and disruptions in the functioning of financial markets, can aggravate vulnerabilities in the financial system under certain conditions, including sudden increases in the prices of large asset classes. Using the dataset for Norway between 1995 and 2018, this study investigates how financial stability affects environmental degradation in Norway while controlling openness in trade, ecological clean energy, and economic growth. Findings from the results demonstrate that (i) financial stability causes a reduction in environmental degradation; (ii) growth causes carbon emissions to climb significantly; and (iii) renewable energy has been favorable for emissions in Norway. Lastly, surprisingly, trade openness causes a decline in carbon emissions. The study recommends that since financial stability in Norway reduces environmental degradation by incorporating climate-related risks into the financial stability monitoring framework, it can contribute to lowering carbon emissions to a greater extent. Norway’s policymakers should conduct detailed analyses of the role of global emissions in long-term petroleum policy and the economic viability of selected climate policy scenarios before implementing such a policy. Moreover, policymakers should be updated on the financial system’s vulnerabilities, considering climate-related shocks are likely to affect all financial systems. In addition, policymakers should encourage the use of sustainable energy to raise the availability of reliable, affordable, and sustainable energy to everyone. Full article