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Fiscal Policy as a Transmission Channel of Oil Price Shocks: Evidence from a VECM Analysis of Non-Oil Growth in Saudi Arabia Under Vision 2030.

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Title: Fiscal Policy as a Transmission Channel of Oil Price Shocks: Evidence from a VECM Analysis of Non-Oil Growth in Saudi Arabia Under Vision 2030.
Authors: Mabrouk, Fatma1 (AUTHOR) fmmabrouk@pnu.edu.sa, Abdulrahim, Hiyam1 (AUTHOR)
Source: Energies (19961073). Jun2026, Vol. 19 Issue 11, p2682. 27p.
Subject Terms: *Fiscal policy, *Economic shock, *Economic equilibrium, *Vector error-correction models, *Diversification in industry
Geographic Terms: Saudi Arabia
Abstract: This study examines the dynamic relationship between global oil prices, fiscal policy, and non-oil economic activity in Saudi Arabia. It provides an integrated analysis of how oil price shocks are transmitted to domestic macroeconomic conditions and examines the role of fiscal policy in shaping economic adjustment and diversification dynamics under Vision 2030. Using quarterly data from 2010 Q1 to 2025 Q3, a Vector Error Correction Model is applied to analyze long-run equilibrium relationships and short-run dynamics among oil prices, consumer prices, government consumption expenditure, and non-oil GDP. The findings reveal a dominant role for fiscal policy within the estimated transmission framework, with oil price increases significantly stimulating government spending. Although fiscal expansion supports non-oil output, its effects remain modest and short-lived, reflecting relatively weak fiscal multipliers. Oil price shocks influence inflation mainly through indirect fiscal channels. While the variables exhibit long-run equilibrium relationships, the response of non-oil GDP to oil price shocks remains indirect, moderate, and transitory, suggesting gradual but incomplete progress toward economic diversification. The study highlights the importance of strengthening countercyclical fiscal frameworks, improving expenditure efficiency, and sustaining structural reforms to enhance macroeconomic stability and reduce vulnerability to oil price volatility. [ABSTRACT FROM AUTHOR]
Database: Energy & Power Source
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DbLabel: Energy & Power Source
An: 194588070
AccessLevel: 6
PubType: Academic Journal
PubTypeId: academicJournal
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  Data: Fiscal Policy as a Transmission Channel of Oil Price Shocks: Evidence from a VECM Analysis of Non-Oil Growth in Saudi Arabia Under Vision 2030.
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  Data: <searchLink fieldCode="AR" term="%22Mabrouk%2C+Fatma%22">Mabrouk, Fatma</searchLink><relatesTo>1</relatesTo> (AUTHOR)<i> fmmabrouk@pnu.edu.sa</i><br /><searchLink fieldCode="AR" term="%22Abdulrahim%2C+Hiyam%22">Abdulrahim, Hiyam</searchLink><relatesTo>1</relatesTo> (AUTHOR)
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  Data: <searchLink fieldCode="JN" term="%22Energies+%2819961073%29%22">Energies (19961073)</searchLink>. Jun2026, Vol. 19 Issue 11, p2682. 27p.
– Name: Subject
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  Data: *<searchLink fieldCode="DE" term="%22Fiscal+policy%22">Fiscal policy</searchLink><br />*<searchLink fieldCode="DE" term="%22Economic+shock%22">Economic shock</searchLink><br />*<searchLink fieldCode="DE" term="%22Economic+equilibrium%22">Economic equilibrium</searchLink><br />*<searchLink fieldCode="DE" term="%22Vector+error-correction+models%22">Vector error-correction models</searchLink><br />*<searchLink fieldCode="DE" term="%22Diversification+in+industry%22">Diversification in industry</searchLink>
– Name: SubjectGeographic
  Label: Geographic Terms
  Group: Su
  Data: <searchLink fieldCode="DE" term="%22Saudi+Arabia%22">Saudi Arabia</searchLink>
– Name: Abstract
  Label: Abstract
  Group: Ab
  Data: This study examines the dynamic relationship between global oil prices, fiscal policy, and non-oil economic activity in Saudi Arabia. It provides an integrated analysis of how oil price shocks are transmitted to domestic macroeconomic conditions and examines the role of fiscal policy in shaping economic adjustment and diversification dynamics under Vision 2030. Using quarterly data from 2010 Q1 to 2025 Q3, a Vector Error Correction Model is applied to analyze long-run equilibrium relationships and short-run dynamics among oil prices, consumer prices, government consumption expenditure, and non-oil GDP. The findings reveal a dominant role for fiscal policy within the estimated transmission framework, with oil price increases significantly stimulating government spending. Although fiscal expansion supports non-oil output, its effects remain modest and short-lived, reflecting relatively weak fiscal multipliers. Oil price shocks influence inflation mainly through indirect fiscal channels. While the variables exhibit long-run equilibrium relationships, the response of non-oil GDP to oil price shocks remains indirect, moderate, and transitory, suggesting gradual but incomplete progress toward economic diversification. The study highlights the importance of strengthening countercyclical fiscal frameworks, improving expenditure efficiency, and sustaining structural reforms to enhance macroeconomic stability and reduce vulnerability to oil price volatility. [ABSTRACT FROM AUTHOR]
PLink https://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=enr&AN=194588070
RecordInfo BibRecord:
  BibEntity:
    Identifiers:
      – Type: doi
        Value: 10.3390/en19112682
    Languages:
      – Code: eng
        Text: English
    PhysicalDescription:
      Pagination:
        PageCount: 27
        StartPage: 2682
    Subjects:
      – SubjectFull: Fiscal policy
        Type: general
      – SubjectFull: Economic shock
        Type: general
      – SubjectFull: Economic equilibrium
        Type: general
      – SubjectFull: Vector error-correction models
        Type: general
      – SubjectFull: Diversification in industry
        Type: general
      – SubjectFull: Saudi Arabia
        Type: general
    Titles:
      – TitleFull: Fiscal Policy as a Transmission Channel of Oil Price Shocks: Evidence from a VECM Analysis of Non-Oil Growth in Saudi Arabia Under Vision 2030.
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            NameFull: Abdulrahim, Hiyam
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            – D: 01
              M: 06
              Text: Jun2026
              Type: published
              Y: 2026
          Identifiers:
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              Value: 19961073
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              Value: 19
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              Value: 11
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            – TitleFull: Energies (19961073)
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