Does government debt and degree of openness and oil price on the inflation rates in GCC countries: Evidence from PARDL and PNARDL approach

Abstract

Purpose

This study investigates the linear and nonlinear effects of government debt, trade openness, and oil prices on inflation rates in Gulf Cooperation Council (GCC) countries from 1980 to 2024. It explores whether these relationships are symmetric or asymmetric and examines how external shocks influence inflationary dynamics.

Design/methodology/approach

The analysis applies Panel Autoregressive Distributed Lag (PARDL) and Panel Nonlinear ARDL (PNARDL) models to capture both long- and short-run dynamics. Stationarity and co-integration tests confirm robust specification, while bootstrap causality tests identify the direction and crisis-sensitivity of relationships among variables.

Findings

The results show that government debt, trade openness, and oil prices exert significant and asymmetric effects on inflation. Positive shocks to trade openness amplify inflationary pressures more strongly than negative shocks. Error correction terms support long-run convergence, and causality tests reveal bidirectional and crisis-sensitive linkages, especially during the 2007–2008 financial crisis and the COVID-19 pandemic.

Research limitations/implications

The study is limited to GCC countries, which may constrain the generalizability of results. Future studies could extend the framework to other resource-dependent economies or incorporate institutional quality indicators.

Practical implications

The findings highlight the need for fiscal and monetary policies that account for asymmetric effects and external vulnerabilities, particularly under global economic shocks.

Social implications

Policies should address inflationary pressures by mitigating structural inequalities and protecting households from uneven distributional impacts of debt, openness, and oil price shocks.

Originality/value<