## wp18278 - 1. Summary Statistics

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### Major findings and context
- “One of the major challenges of the interconnectedness of the global economy is that, when one major player gets a virus, the rest of us tend to catch it too”.
- Saudi Arabia is characterized as a major regional player.
- Saudi Arabia experienced slower economic growth during 2015–17 following the decline in oil prices, although some recovery is now underway.
- After a decade of strong economic activity from 2004–14 during which real non-oil GDP growth averaged about 7.5 percent, non-oil growth decelerated during 2015–17 to about 2 percent, and is projected (excerpted context).

### Paper contributions and empirical approach
- Focus: quantifies growth spillovers from Saudi Arabia to other GCC countries, emphasizing non-oil real GDP spillovers rather than total real GDP to isolate regional transmission from oil-production-driven output.
- Extends financial-linkage analysis by examining sovereign bond spreads in addition to equity markets.
- Empirical approaches:
  - Real spillovers: fixed-effects panel regression of non-oil real GDP growth on Saudi non-oil real GDP growth shocks (orthogonalized), logged real oil price, U.S. real interest rate, and U.S. real GDP growth.
  - Financial spillovers: daily-panel regressions for equity returns and 10-year government bond spreads using Saudi equity/bond shocks orthogonal to global variables (Δoil price, U.S. equity returns, VIX, EMBI global spread) and 30 lagged dependent variables.

### Stylized facts: trade and financial linkages within GCC
- Intra-GCC non-oil exports (excluding SITC Section 3) averaged about 13 percent during 2007–2016.
- Saudi Arabia’s exports to the GCC were more than $12 billion in 2016.
- Country-specific exposures to Saudi Arabia:
  - Bahrain: more than a quarter of its total non-oil exports went to Saudi Arabia in 2016; Saudi tourists represented about 90 percent of Bahrain’s total tourist arrivals in 2016 and 5 percent of its non-oil GDP in 2014.
  - Oman: 11 percent of non-oil exports destined for Saudi Arabia in 2016.
  - Kuwait: 9 percent of non-oil exports destined for Saudi Arabia in 2016.
  - UAE: Saudi Arabia’s share in UAE’s total non-oil exports is low (about 3 percent).
- Inward FDI and portfolio exposures:
  - Stock of inward FDI in Saudi Arabia from other GCC countries accounted for more than $35 billion in 2015 (about 10 percent of non-oil GDP).
  - UAE portfolio investment exposure to Saudi equity: $9 billion (3.2 percent of non-oil GDP) in 2015.
  - Qatar portfolio investment exposure to Saudi equity: $6 billion (6 percent of non-oil GDP) in 2015.
- Banking and liquidity linkages: changes in Saudi banks’ liquidity positions can alter resident banks’ foreign asset holdings and affect liquidity in other GCC countries, particularly those dependent on non-resident deposits and wholesale funding.
- GCC co-movements:
  - Saudi Arabia is the largest economy in the GCC (46 percent of the GCC non-oil GDP).
  - Real non-oil GDP growth rates, stock market indices, and 10-year sovereign bond prices across GCC countries have exhibited considerable co-movement.
- In 2016, oil and gas production constituted on average about 42 percent of total real GDP in GCC countries.

### Empirical evidence of real spillovers
- Data and specification:
  - Dependent variable: non-oil real GDP growth in GCC countries (excluding Saudi Arabia).
  - Key regressor: Saudi non-oil real GDP growth shock orthogonalized to global variables and lagged by one year.
  - Controls: logged real oil price (average of Brent, WTI, Dubai Fateh deflated by U.S. CPI), U.S. real interest rate, U.S. real GDP growth, country fixed effects.
  - Sample: annual 1991–2016 (panel of five GCC countries; Oman from 1999 due to structural break).
- Main panel result:
  - A one percentage point change in Saudi Arabia’s growth is associated with about 0.6 percentage point change in growth on average in the region, controlling for other factors.
- Country-level heterogeneity:
  - Bahrain: a one percent positive shock to Saudi Arabia’s non-oil real GDP is associated with a 0.8 percent increase in Bahrain’s non-oil real GDP in the subsequent year (statistically significant).
  - Kuwait, Oman, Qatar, UAE: coefficients on Saudi non-oil growth correctly signed but not statistically significant.
- Robustness and diagnostics:
  - Saudi non-oil growth shocks computed as residuals after orthogonalization to reduce multicollinearity; lagging used to mitigate endogeneity concerns.
  - Driscoll-Kraay standard errors employed to account for heteroskedasticity, autocorrelation, and cross-sectional dependence.
  - Results robust to inclusion of lagged dependent variable and alternative measures of Saudi non-oil growth shocks (HP filter, Baxter-King).

### Empirical evidence of financial market comovements
- Equity market spillovers:
  - Data: daily equity returns, January 1, 2004 to August 30, 2018 (panel excluding Saudi Arabia).
  - Finding: a one percentage point increase in Saudi equity market returns is associated with a 0.06 percentage point increase in the rest of the GCC equity returns in the subsequent day.
  - Global controls: Δoil price and U.S. equity returns positively associated with GCC equity returns; higher VIX lowers GCC equity returns.
  - Additional note: Dubai stock market also generates significant spillovers to other GCC stock markets; its spillover size is half of that from the Saudi stock market.
- Bond market spillovers:
  - Data: 10-year government bond spreads (sample shorter: Oct. 2016–Aug. 2018; Kuwait excluded).
  - Finding: Saudi Arabia’s 10-year government bond spread shocks do not have a statistically significant impact on the bond spreads of the rest of the GCC.
  - Drivers of GCC bond spreads: their own lags, oil prices (larger oil price increases narrow GCC bond spreads), and EMBI global spreads (wider EMBI global spreads relate to wider GCC spreads).
  - Interpretation: bond spread movements are largely driven by global factors; evidence consistent with prior literature that equity markets transmit regional spillovers more than bond markets.

### Key statistics (selected, exact values preserved)
- Non-oil intra-GCC exports averaged about 13 percent during 2007–2016.
- Saudi exports to the GCC were more than $12 billion in 2016.
- Bahrain: more than a quarter of its total non-oil exports to Saudi Arabia in 2016.
- Bahrain: Saudi tourists represented about 90 percent of Bahrain’s total tourist arrivals in 2016 and 5 percent of its non-oil GDP in 2014.
- Stock of inward FDI in Saudi Arabia from other GCC countries: more than $35 billion in 2015 (about 10 percent of non-oil GDP).
- UAE portfolio exposure to Saudi equity: $9 billion (3.2 percent of non-oil GDP) in 2015.
- Qatar portfolio exposure to Saudi equity: $6 billion (6 percent of non-oil GDP) in 2015.
- Saudi Arabia: 46 percent of the GCC non-oil GDP.
- Estimated regional non-oil growth spillover: one percentage point change in Saudi growth → about 0.6 percentage point change in regional growth.
- Bahrain-specific spillover: one percent Saudi non-oil growth shock → 0.8 percent Bahrain non-oil growth (subsequent year).
- Equity spillover magnitude: one percentage point increase in Saudi equity returns → 0.06 percentage point increase in other GCC equity returns (subsequent day).
- In 2016, oil and gas production constituted on average about 42 percent of total real GDP in GCC countries.

### Conclusions and policy implications
- Empirical conclusions:
  - Real growth spillovers from Saudi Arabia to Bahrain are sizeable and statistically significant; spillovers to other GCC countries are not statistically significant in the sample.
  - Small, statistically significant spillovers exist from the Saudi equity market to other GCC equity markets.
  - No significant regional spillovers detected in bond markets; bond spreads are influenced mainly by global indicators.
- Policy implications:
  - Increased intra-GCC trade and financial linkages, in the context of diversification initiatives, could strengthen regional transmission of positive spillovers and provide stronger outcomes in the future.
  - The availability of fiscal and external buffers in some GCC countries limits potential economic and financial impact from adverse Saudi shocks, but country-specific exposures (e.g., Bahrain’s dependence) warrant targeted contingency planning.

*Source: wp18278 - 1. Summary Statistics (IMF PDF).*

### 1. Summary Statistics...................................................................................................

### wp18278 - 1. Summary Statistics

### Major sections (as listed)
- 1. Summary Statistics...............................................................................................................12
- 2. Determinants of the GCC Non-Oil Real GDP Growth: Panel Regressions ........................12
- 3. Determinants of the GCC Equity Returns and Bond Spreads: Panel Regression ................15
- 4. Determinants of the GCC Equity Returns and Bond Spreads: Panel Regression ................15

### Figures (as listed)
- 1. GCC Non-Oil Exports............................................................................................................5
- 2. Saudi Arabia’s Imports from GCC Countries ........................................................................5
- 3. Tourism Exposure to Saudi Arabia ........................................................................................6
- 4. GCC: Inward Direct Investment, 2015 ..................................................................................6
- 5. GCC: Portfolio Investment Asset, 2015 ................................................................................7
- 6. Change in Bank Foreign Assets and Liabilities .....................................................................7
- 7. Real and Financial Sector Co-Movements Within GCC .......................................................9

### Introductory findings and context (excerpt)
- “One of the major challenges of the interconnectedness of the global economy is that, when one major player gets a virus, the rest of us tend to catch it too”.
- Saudi Arabia is characterized as a major regional player.
- Saudi Arabia experienced slower economic growth during 2015–17 following the decline in oil prices, although some recovery is now underway.
- After a decade of strong economic activity from 2004–14 during which real non-oil GDP growth averaged about

*Source: wp18278 - 1. Summary Statistics (IMF PDF).*

### 7.5 percent, non-oil growth decelerated during 2015–17 to about 2 percent, and is projected

### 7.5 percent, non-oil growth decelerated during 2015–17 to about 2 percent, and is projected

### Paper contributions and approach
- Focus: quantifies growth spillovers from Saudi Arabia to other GCC countries, emphasizing non-oil real GDP spillovers rather than total real GDP to isolate regional transmission from oil-production-driven output.
- Extends financial-linkage analysis by examining sovereign bond spreads in addition to equity markets.
- Empirical approaches:
  - Real spillovers: fixed-effects panel regression of non-oil real GDP growth on Saudi non-oil real GDP growth shocks (orthogonalized), logged real oil price, U.S. real interest rate, and U.S. real GDP growth.
  - Financial spillovers: daily-panel regressions for equity returns and 10-year government bond spreads using Saudi equity/bond shocks orthogonal to global variables (Δoil price, U.S. equity returns, VIX, EMBI global spread) and 30 lagged dependent variables.

### Stylized facts: trade and financial linkages within GCC
- Intra-GCC non-oil exports (excluding SITC Section 3) averaged about 13 percent during 2007–2016.
- Saudi Arabia’s exports to the GCC were more than $12 billion in 2016.
- Country-specific exposures to Saudi Arabia:
  - Bahrain: more than a quarter of its total non-oil exports went to Saudi Arabia in 2016; Saudi tourists represented about 90 percent of Bahrain’s total tourist arrivals in 2016 and 5 percent of its non-oil GDP in 2014.
  - Oman: 11 percent of non-oil exports destined for Saudi Arabia in 2016.
  - Kuwait: 9 percent of non-oil exports destined for Saudi Arabia in 2016.
  - UAE: Saudi Arabia’s share in UAE’s total non-oil exports is low (about 3 percent).
- Inward FDI and portfolio exposures:
  - Stock of inward FDI in Saudi Arabia from other GCC countries accounted for more than $35 billion in 2015 (about 10 percent of non-oil GDP).
  - UAE portfolio investment exposure to Saudi equity: $9 billion (3.2 percent of non-oil GDP) in 2015.
  - Qatar portfolio investment exposure to Saudi equity: $6 billion (6 percent of non-oil GDP) in 2015.
- Banking and liquidity linkages: changes in Saudi banks’ liquidity positions can alter resident banks’ foreign asset holdings and affect liquidity in other GCC countries, particularly those dependent on non-resident deposits and wholesale funding.
- GCC co-movements:
  - Saudi Arabia is the largest economy in the GCC (46 percent of the GCC non-oil GDP).
  - Real non-oil GDP growth rates, stock market indices, and 10-year sovereign bond prices across GCC countries have exhibited considerable co-movement.

### Empirical evidence of real spillovers
- Empirical strategy:
  - Dependent variable: non-oil real GDP growth in GCC countries (excluding Saudi Arabia).
  - Key regressor: Saudi non-oil real GDP growth shock orthogonalized to global variables and lagged by one year.
  - Controls: logged real oil price (average of Brent, WTI, Dubai Fateh deflated by U.S. CPI), U.S. real interest rate, U.S. real GDP growth, country fixed effects.
  - Data: annual 1991–2016 (panel of five GCC countries; Oman from 1999 due to structural break).
- Main findings:
  - Panel result: a one percentage point change in Saudi Arabia’s growth is associated with about 0.6 percentage point change in growth on average in the region, controlling for other factors.
  - Country-level heterogeneity:
    - Bahrain: a one percent positive shock to Saudi Arabia’s non-oil real GDP is associated with a 0.8 percent increase in Bahrain’s non-oil real GDP in the subsequent year (statistically significant).
    - Kuwait, Oman, Qatar, UAE: coefficients on Saudi non-oil growth correctly signed but not statistically significant.
- Robustness and diagnostics:
  - Saudi non-oil growth shocks computed as residuals after orthogonalization to reduce multicollinearity; lagging used to mitigate endogeneity concerns.
  - Driscoll-Kraay standard errors employed to account for heteroskedasticity, autocorrelation, and cross-sectional dependence.
  - Results robust to inclusion of lagged dependent variable and alternative measures of Saudi non-oil growth shocks (HP filter, Baxter-King).

### Empirical evidence of financial markets comovements
- Equity market spillovers:
  - Data: daily equity returns, January 1, 2004 to August 30, 2018 (panel excluding Saudi Arabia).
  - Finding: a one percentage point increase in Saudi equity market returns is associated with a 0.06 percentage point increase in the rest of the GCC equity returns in the subsequent day.
  - Global controls matter: Δoil price and U.S. equity returns positively associated with GCC equity returns; higher VIX lowers GCC equity returns.
  - Additional note: Dubai stock market also generates significant spillovers to other GCC stock markets; its spillover size is half of that from the Saudi stock market.
- Bond market spillovers:
  - Data: 10-year government bond spreads (sample shorter: Oct. 2016–Aug. 2018; Kuwait excluded).
  - Finding: Saudi Arabia’s 10-year government bond spread shocks do not have a statistically significant impact on the bond spreads of the rest of the GCC.
  - Drivers of GCC bond spreads: their own lags, oil prices (larger oil price increases narrow GCC bond spreads), and EMBI global spreads (wider EMBI global spreads relate to wider GCC spreads).
  - Interpretation: bond spread movements are largely driven by global factors; evidence consistent with prior literature that equity markets transmit regional spillovers more than bond markets.

### Key statistics (selected, preserved exactly)
- Non-oil intra-GCC exports averaged about 13 percent during 2007–2016.
- Saudi exports to the GCC were more than $12 billion in 2016.
- Bahrain: more than a quarter of its total non-oil exports to Saudi Arabia in 2016.
- Bahrain: Saudi tourists represented about 90 percent of Bahrain’s total tourist arrivals in 2016 and 5 percent of its non-oil GDP in 2014.
- Stock of inward FDI in Saudi Arabia from other GCC countries: more than $35 billion in 2015 (about 10 percent of non-oil GDP).
- UAE portfolio exposure to Saudi equity: $9 billion (3.2 percent of non-oil GDP) in 2015.
- Qatar portfolio exposure to Saudi equity: $6 billion (6 percent of non-oil GDP) in 2015.
- Saudi Arabia: 46 percent of the GCC non-oil GDP.
- In 2016, oil and gas production constituted on average about 42 percent of total real GDP in GCC countries.
- Estimated regional non-oil growth spillover: one percentage point change in Saudi growth → about 0.6 percentage point change in regional growth.
- Bahrain-specific spillover: one percent Saudi non-oil growth shock → 0.8 percent Bahrain non-oil growth (subsequent year).
- Equity spillover magnitude: one percentage point increase in Saudi equity returns → 0.06 percentage point increase in other GCC equity returns (subsequent day).

### Conclusions and policy implications
- Empirical conclusions:
  - Real growth spillovers from Saudi Arabia to Bahrain are sizeable and statistically significant; spillovers to other GCC countries are not statistically significant in the sample.
  - Small, statistically significant spillovers exist from the Saudi equity market to other GCC equity markets.
  - No significant regional spillovers detected in bond markets; bond spreads are influenced mainly by global indicators.
- Policy implications:
  - Increased intra-GCC trade and financial linkages, in the context of diversification initiatives, could strengthen regional transmission of positive spillovers and provide stronger outcomes in the future.
  - The availability of fiscal and external buffers in some GCC countries limits potential economic and financial impact from adverse Saudi shocks, but country-specific exposures (e.g., Bahrain’s dependence) warrant targeted contingency planning.

*Source: IMF working paper content (wp18278).*

### Chapter 3 (Washington: International Monetary Fund).

### Chapter 3 (Washington: International Monetary Fund)

### IMF Regional and Thematic Reports
- ____. 2016a. Regional Economic Outlook. “MENAP Oil Exporters: Adjustment to Cheaper Oil Continuing” (Washington: International Monetary Fund).
- ____. 2016b. “The Growing Importance of Financial Spillovers from Emerging Market Economies.” Global Financial Stability Report, April 2016: Chapter 2 (Washington: International Monetary Fund).
- ____. 2017a. Regional Economic Outlook. “MENAP Oil Exporters: Need to Push Ahead with Fiscal Consolidation and Diversification” (Washington: International Monetary Fund).
- ____. 2017b. “The Economic Outlook and Policy Challenges in the GCC Countries.” GCC Surveillance Paper ((Washington: International Monetary Fund).
- ____. 2017c. “Strengthening Liquidity Management Frameworks in Support of Stability and Growth in the GCC” (Washington: International Monetary Fund).

### Working Papers and Academic Articles on GCC Spillovers and Contagion
- Sedik, Tahsin Saadi, and Oral H. Williams. 2011. “Global and regional spillovers to GCC equity markets.” IMF Working Paper No. 11-138. International Monetary Fund, 2011.
- Suliman, Osman. 2011. "The large country effect, contagion and spillover effects in the GCC." Applied Economics Letters 18.3 (2011): 285-294.

*Source: wp18278 - Chapter 3 (Washington: International Monetary Fund).*

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_Source: https://www.imf.org/-/media/files/publications/wp/2018/wp18278.pdf_