The oil curse, institutional quality, and growth in MENA countries: Evidence from time-varying cointegration

- The impact of oil reserves on growth is time-varying.
- The adverse impact of the oil curse is offset with improvements in institutional quality.
- The results for resource rich MENA countries depend on the availability of domestic labor.

This study re-examines the impact of oil abundance on economic growth in a number of MENA (Middle East and North African) countries for the period 1990-2013. Given the number of economic and institutional reforms undertaken by these countries in recent years, we incorporate measures of institutional quality to evaluate if oil abundance impacts economic growth differently. The results from time-varying cointegration reveal that better institutional quality reduces the unfavorable effect of oil reserves on the performance of the real economy.