Is there a Relationship between Oil Price & Military Expenditure in GCC Countries?

Research Paper Title

Relationship between oil price volatility and military expenditures in GCC countries.

Background

Natural resource-rich countries transfer more sources to military expenditures due to extreme security concerns.

As public revenues have declined due to the decline in oil prices, military expenditures have been cut in many countries. Nevertheless, this is not valid for all countries.

Even in some countries, despite the decrease in oil prices and volatility, military expenditures increase.

The aim of this study is to investigate the relationship between volatility in oil prices and military expenditures in GCC countries (United Arab Emirates, Bahrain, Qatar, Kuwait, Saudi Arabia, and Oman).

Methods

The analysis period was determined differently for each country depending on the availability of data.

UAE and Qatar were excluded from the analysis as the defence expenditures data of these countries could not be provided regularly.

ARDL model was preferred for the research.

Results

According to the bound test results, there is a cointegration relationship between the variables in all countries.

Besides, the long-term results showed that the volatility in oil prices in all countries, except for Bahrain, positively affects military expenditures.

The error correction model indicated that there is a reverse relationship between oil price volatility and military expenditures.

Conclusions

These findings indicated that despite the volatility in oil prices, military expenditures in GCC countries are not reduced.

Reference

Erdogan, S., Cevik, E.I. & Gedikli, A. (2020) Relationship between oil price volatility and military expenditures in GCC countries. Environmental Science and Pollution Research International. 27(14), pp.17072-17084. doi: 10.1007/s11356-020-08215-3. Epub 2020 Mar 7.

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