IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF SOCIAL SCIENCES AND MANAGEMENT RESEARCH (IJSSMR )

E-ISSN 2545-5303
P-ISSN 2695-2203
VOL. 4 NO. 2 2018

---

Testing for Linearity between Oil Export Earnings and Economic Growth among OPEC Countries

Obianuju Edith Ndu-Okereke (Ph.D)

---

Abstract

This research looked into the linear relationship between oil export earnings and the GDP of OPEC member states in a ten – year period. The research objective being to test for linear relationship between oil export earnings and the economic growth of the member countries of OPEC. The methodology employed E-view statistics using least squares (NLS and ARMA) the linear equation was re-stated as gdp gross_exp oil_exp year c. The dependent variable followed by least of regressors including ARMA and PDL terms involved an explicit equation stated thus; Y = c(1)+c(2)*X. The Durbin Watson statistics reveals that there are slight traces of spatial and serial autocorrelation for most of the countries studied. The Akaike and Schwarz criteria for all countries except Gabon showed near perfect model convergence near zero with a average difference between the two criteria at 0.12 except Gabon with 0.31. And this is an indication that there is a better fit in the model since it shows a favorable trade – off between the lack of fit and the number of parameters in the model. For most of the countries under study it was evident that there were significant relationship between the oil export earnings and the GDP on one hand and the total export earnings and the GDP on the other except for countries like Kuwait and Venezuela with variations in the dependent variable (R2) being less than 50%. But in all there is a good indicator that there is a good fit and observed outcomes are well replicated as the regression line approximates the real data points. For countries like Iran that have faced severe sanctions on oil exports to have R2 as much as 74% shows the level of adaptation their economy had adopted over the years to non – oil exports. Venezuela has been in facing hyper inflation and heavy currency devaluation which meant the country had to borrow more to import essential commodities and of course it had negative effect on the GDP. However, since it has been observed that variations

---

DOWNLOAD PDF

---

Back