The Oil Price Volatility and the Future of Saudi Arabian Service Sector: An Empirical Analysis
The Oil Price Volatility and the Future of Saudi Arabian Service Sector: An Empirical Analysis

Summary/Abstract: The purpose of this paper is to tackle theoretically and empirically the effects of non-linear oil price changes on Saudi Arabian service (non-traded) sector for the period of 1970 till 2015, using structural vector autoregressive (SVAR) approach. As part of the Dutch disease literature, the non-traded goods sector (service) is considered, and the impacts of oil price variations (increase and decrease) on this sector are investigated. Johansen’s testing procedure results assert the existence of stable long-run relationship between real service sectors (RS), oil price increase and decrease, real government expenditure (GOEX), real exchange rate (REX), and the mining sector (MINING). The findings confirm that OILPI, REX, spending effect GOEX, and MINING influence RS positively, while oil price decrease affects RS negatively, and the signs as expected a priori. Given, the obtained tests’ results, the exchange rate REX appreciation and the spending effects confirm the existence of the Dutch disease, and consistent with the Dutch disease literature and findings. The service sector befits much during periods of oil booms.

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