Sources of macroeconomic fluctuations in a small, developing, oil -exporting economy: The case of the Sultanate of Oman

This study examines in the context of an open economy framework the relative significance of domestic and foreign shocks as sources of macroeconomic fluctuations in a small developing oil-exporting economy, the Sultanate of Oman. The empirical methodology we employ to identify our shocks is the structural vector autoregression (SVAR) model with block exogeneity constraints. The results from our forecast error variance decompositions (FEVDs) indicate that domestic shocks, namely nominal money and supply shocks are the most important factors driving non-oil output growth volatility in Oman. External factors, on the other hand, are found to be of less importance in explaining the same.