The Effect of Wealth Funds and Institutional Quality on the Interaction between Oil Price and Economic Growth

Document Type : Original Article

Authors

1 PhD in Economics, Institute for Management and Planning studies,Tehran, Iran

2 Assistant Professor, Khatam University,Tehran, Iran

Abstract

Fluctuations in natural resource and commodity prices generally cause prosperity and recession cycles in natural resource-rich economies and can lead to irregular growth performance. Therefore, managing financial funds arising from natural resources is among the most significant policy challenges in countries with abundant natural resources. Wealth funds are savings and investment funds with specific purposes that are created by governments to pursue macroeconomic management objectives. Although several decades have passed since the establishment of these funds in different countries, only a few studies have been conducted on their effectiveness and efficiency.
This study investigates the effect of wealth funds on the economic growth of 15 major oil-exporting countries, which account for 80% of the world’s net oil exports, using the Generalized Method of Moments (GMM) estimator for Dynamic Panel Data (DPD) considering institutional quality level. The results indicate that wealth funds positively and significantly impact the correlation between oil prices and economic growth in oil-exporting countries. This also applies to the correlation between oil prices and economic growth in oil-exporting countries with high institutional quality.

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Journal of Energy and Economic Development
Volume 1, Issue 2
September 2022
Pages 67-85

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