The Impact of Crude Oil Prices Volatility in The Response of Fiscal Policy in The Kingdom of Saudi Arabia during The Period (1990 – 2017)

Abstract

The research aims at measuring and analyzing the relationship between crude oil prices Volatility and the response of fiscal policy in the Kingdom of Saudi Arabia (KSA) during the period (1990 - 2017) using the NARDL model, as well as exploring the impact of a sharp decline in the price of crude oil on the response of fiscal policy in KSA. The research found that there is a long-term positive non-linear relationship between crude oil prices volatility in the international market and the response of the fiscal policy in KSA. A (1%) increase in oil price will lead to an (0.856%) increase in public expenditures, and if the price of oil falls with a rate of (1%), it will lead to a decrease in public expenditures by (0.816%). Moreover, a change in public revenues by (1%) will lead to a change in public expenditures by (0.986%). Likewise, a sharp decline in crude oil prices will lead to a decrease in public expenditures in KSA, which reach its peak after three seasons. Then, the state expenditures begin to increase reaching the equilibrium level, as it was before the oil price sharp decline.