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The dynamics and determinants of Kuwait's long-run economic growth

Accepted version
Peer-reviewed

Type

Article

Change log

Authors

Burney, NA 
Alawadhi, A 
Al-Musallam, M 

Abstract

This paper develops a quarterly macro-econometric model for the Kuwaiti economy estimated over the period 1979Q2-2013Q1, allowing us to investigate the long-run role of oil income in the development of Kuwait as well as the direct effects of oil revenue, foreign output, and equity price shocks on real output. More specifically, we examine to what extent Kuwaiti real output in the long run is shaped by oil revenue through their impact on capital accumulation, and technological transfers through foreign output. Using the same modelling strategy we also explore the role of oil income in terms of long-run private and public sector output growth (separately). The estimates suggest that real domestic output in the long run is influenced by oil revenues and foreign output (a proxy for technological progress), and technological growth in Kuwait is on a par with the rest of the world. Furthermore, while we show that both oil revenues and foreign output drive growth in the public sector, it seems that technological progress is the main (and only) driver for private sector real growth. Finally, our results show that oil revenue and global equity market shocks have a large and significant long-run impact on Kuwait's real output and public sector GDP. In comparison, the effects of the foreign output shock is muted.

Description

Keywords

38 Economics, 3801 Applied Economics, 3802 Econometrics, 8 Decent Work and Economic Growth

Journal Title

Economic Modelling

Conference Name

Journal ISSN

0264-9993

Volume Title

71

Publisher

Elsevier