Export instability and economic growth: the case of OPEC

Abstract

OPEC is one of the most important organizations that were created by oil exporting countries. Oil sector is the most effective sector in these countries. Oil is the most important product that world industries use as the cheapest energy. The price of oil depends on the world’s supply and demand and many economic, political and geographical variables. This is the reason why the price of oil has fluctuations. The fluctuations in oil price lead to fluctuations in the oil revenues of the member countries of OPEC. Because the economic system of these countries directly depends on oil sector, economic growth is affected by the oil sector. In this thesis, an attempt is made to explain the effect of export instability on economy, by using economic growth modeling and panel data analysis with time series data from 1981 to 2006 for seven member countries of OPEC. The results show that there is a strong negative relationship between export instability and economic growth, which is significant. In other words, export instability either positive or negative creates many problems for this kind of countries. This means that if the revenue of oil exports in these countries increases, they fall in trouble. We can also clearly see this problem in economic growth rate. Therefore, export instability in OPEC countries is not beneficial to them. Therefore they should try to stabilize their revenues and manage their revenue usage properly.