The Development role of GCC Foreign Trade under Resources Curse, Openness and Institutional Quality

Abstract

The current study was differentiated from previous empirical studies given its reliance on a panel dynamic model to analize the relationship between trade and economic growth, through addressing the impact of resource curse, openness and institutional quality on the economic growth of the Arab Gulf Cooperation Council (GCC) during the period (2002-2012). This model was based, on the long run, on the panel cointegration tests, the fully modified least squares method and dynamic least squares methods. On the short run, the relationship was estimated through the use of Impulse response functions. It concluded that trade openness has an important role in explaining the economic growth of the GCC on the long run, the role of oil exports is uncertain, while the role of institutional quality is absent. On the short run, the institutional quality level achieved by these countries may prevent the negative impact of dependence on oil exports. Accordingly, the resource curse hypothesis was not proven in the GCC countries on the long or short runs.