Mineral and Non-Mineral Sector Interdependency: Empirical Evidence From Oman

Abstract

Most work on mineral dependent economies use simple and straightforward calculations to estimate the level of dependency on the mineral sector. Typical assessments by researchers on mineral dependency look at the contribution of the mineral sector to total exports, its share in GDP, or the share of mineral revenues in total government revenues. Empirical research on the inter-sectoral dependencies between the mineral and non-mineral sectors is, however, quite rare. In this paper, the inter-sectoral relationships between the mineral sector, represented by oil, and the non-mineral sectors in Oman since 1967, have been investigated using VAR and multivariate cointegration techniques and Granger causality tests. This modeling procedure will provide an understanding of the potential links between oil income and non-oil sectors growth and its impact on the overall economy. While also highlighting important policy and development strategies, the results reveal important information about sector dependency and the dynamics of the oil and non-oil sectors