An analysis of the interrelational dynamics between economic growth, public spending and oil revenues: the Ecuadorian case (1970-2022)
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Published:
Jun 30, 2025
Keywords:
ARDL, Economic Growth, Public Expenditure, Oil Revenues, VEC
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Abstract
In the Ecuadorian economy, there is a strong relationship between economic growth, oil revenues and public spending. Understanding the interrelational dynamics of these variables is fundamental for efficient resource management; this understanding will allow the implementation of policies that optimise the use of oil revenues and public spending, generating a more favourable and sustainable economic scenario. This paper models these dynamics over the period 1970-2022, applying robust econometric methods such as the Vector Autoregressive (VEC) and the Autoregressive Distributed Lag (ARDL) models, in addition to statistical stationarity tests (ADF, PP, and KPSS) and Box-Cox transformations. The results indicate a cointegration relationship among GDP per capita, public spending, and oil revenues, indicating a long-term equilibrium. In the short term, oil revenues have a significant positive effect on economic growth, which challenges the natural resource curse hypothesis. However, over the long term, the impact of public spending on economic growth is the opposite.
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Sarmiento, S. (2025). An analysis of the interrelational dynamics between economic growth, public spending and oil revenues: the Ecuadorian case (1970-2022). Cuestiones Económicas, 35(1), Autores: Erika Arce, Alfredo Loja y Luis Sarmiento. https://doi.org/10.47550/35.1.3
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Artículos de Investigación
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References
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Al Rasasi, M. H., Qualls, J. H., & Algamdi, B. K. (2019). Oil Revenues and Economic Growth in Saudi Arabia. International Journal of Economics and Financial Research, 5 (3), 49–55. https://doi.org/10.32861/ijefr.53.49.55
Alvarado, R., Cuesta, L., Kumar, P., Rehman, A., Murshed, M., Işık, C., ... Tillaguango, B. (2022). Impact of Natural Resources on Economic Progress: Evidence for Trading Blocs in Latin America Using Non-Linear Econometric Methods. Resources Policy, 79 , 102908. https://doi.org/10.1016/j.resourpol.2022.102908
Bonet-Morón, J. P.-V., & Marín-Llanes, L. (2020). Oil Shocks and Subnational Public Investment: The Role of Institutions in Regional Resource Curse. Energy Economics, 92 https://doi.org/10.1016/j.eneco.2020.105002
Box, G., & Cox, D. (1964). An Analysis of Transformations. Journal of the Royal Statistical Society Series B: Statistical Methodology, 26 (2), 211–243. https://doi.org/10.1111/j.2517-6161.1964.tb00553.x
Cai, C.-H., Lu, Z.-H., & Zhao, Y.-G. (2020). Moment Method with Box–Cox Transformation for Structural Reliability. Journal of Engineering Mechanics, 146 (8) https://doi.org/10.1061/(ASCE)EM.1943-7889.0001824
Cardoso, P., & Chavez, H. (2023). Booms petroleros, quimeras de transformación productiva y el retorno de Washington. Revue Internationale Des Études Du Développement, 203–233. https://doi.org/10.4000/ried.8179
Carrillo, P. (2017). El efecto de la política fiscal en expansión y recesión para Ecuador: un modelo MSVAR. Cuadernos de Economía, 36 (71), 405–439. https://doi.org/10.15446/cuad.econ.v36vn72.53570
Cuenca, A., & Ochoa Jiménez, D. (2017). Economic Growth and Natural Resources in Latin America: An Application of the Stiglitz Model. ECORFAN Journal-Republic of Paraguay, 3–5. https://bit.ly/3XTEBNA
Damette, O., & Seghir, M. (2018). Natural Resource Curse in Oil Exporting Countries: A Nonlinear Approach. International Economics , 231–246. https://doi.org/10.1016/j.inteco.2018.04.001 Un análisis de la dinámica interrelacional entre crecimiento económico, gasto público e ingresos petroleros: caso ecuatoriano (1970-2022) 96 Erika Arce Alfredo Loja Luis Sarmiento
Enders, W. (2015). Applied Econometric Time Series (4th ed.). John Wiley & Sons, Inc.
Engle, R., & Granger, C. (1987). Co-integration and Error Correction: Representation, Estimation, and Testing. Econometrica , 251–276. https://doi.org/10.2307/1913236
Engle, R., & Yoo, B. (1987). Forecasting and Testing in Co-Integrated Systems. Journal of Econometrics, 35 (1), 143–159. https://doi.org/10.1016/0304-4076(87)90085-6
Eregha, P., & Mesagan, E. (2020). Oil Resources, Deficit Financing and Per Capita GDP Growth in Selected Oil-Rich African Nations: A Dynamic Heterogeneous Panel Approach. Resources Policy, 66. https://doi.org/10.1016/j.resourpol.2020.101615
Fubara, S., Iledare, O., Gershon, O., & Ejemeyovwi, J. (2019). Natural Resource Extraction And Economic Performance of the Niger Delta Region in Nigeria. International Journal of Energy Economics and Policy, 9 (4), 88–193. https://doi.org/10.32479/ijeep.7716
Granger, C. (1988). Some Recent Development in a Concept of Causality. Journal of Econometrics, 199–211. https://doi.org/10.1016/0304-4076(88)90045-0
Gruss, B. (2014, junio 12). América Latina: creciendo sin la locomotora de los commodities. IMF blog-Ideas y análisis sobre economía y finanzas. https://www.imf.org/es/Blogs/Articles/2014/06/12/3991
Guichay, M., Vacacela, J., & León, L. (2022). Ecuador: análisis del crecimiento económico y el sector público no financiero período 2012-2020. Espíritu Emprendedor TES, 6(1), 51–69. https://doi.org/10.33970/eetes. v6.n1.2022.297
Hassan, A. S. (2021). Asymmetric Effects of Oil Revenue on Government Expenditure: Insights from Oil-Exporting Developing Countries. OPEC Energy Review, 45 (2), 257–274. https://doi.org/10.1111/opec.12203
Jarque, C., & Bera, A. K. (1987). A Test for Normality of Observations and Regression Residuals. International Statistical Review , 163–172.
Johansen, S. (1988). The Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12 , 231–254. https://doi.org/10.1016/0165-1889(88)90041-3
Johansen, S. (1995). Likelihood-Based Inference in Cointegrated Vector Autoregressive Models . Oxford University Press.
Kartsonakis, D., & Dritsakis, N. (2020). A Note on the Use of the Box-Cox Transformation For Financial Data. International Journal of Computational Economics and Econometrics, 10 (4), 419–422. https://doi.org/10.1504/IJCEE.2020.110755
Kripfganz, S., & Schneider, D. (2023). Estimating Autoregressive Distributed Lag and Equilibrium Correction Models. The Stata Journal, 23(4), 983–1019. https://doi.org/10.1177/1536867X231212434
Kwiatkowski, D., Phillips, P., Schmidt, P., & Shin, Y. (1992). Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root? Journal of Econometrics, 54(1–3), 159–178. https://doi.org/10.1016/0304-4076(92)90104-Y
Lütkepohl, H., & Krätzig, M. (2004). Applied Time Series Econometrics. Cambridge University Press.
Mahadeva, L., & Robinson, P. (2004). Unit Root Testing to Help Model Building. En A. Blake & G. Hammond (Eds.), Handbooks in Central Banking. Centre for Central Banking Studies, Bank of England.
Martin-Mayoral, F., & Carvajal, A. (2023). Direct and Indirect Impacts of Oil Price Shocks on Ecuador’s Economic Cycles (2000:01–2020:01). Estudios de Economía, 50 (2), 379–412. https://doi.org/10.4067/S0718-52862023000200379
Mauricio, J. A. (2007). Introducción al análisis de series temporales. Universidad Complutense de Madrid.
Mehrara, M. (2008). The Asymmetric Relationship Between Oil Revenues and Economic Activities: The Case of Oil-Exporting Countries. Energy Policy, 1164–1168. https://doi.org/10.1016/j.enpol.2007.11.004
Mohammed, J. I., Karimu, A., Ogeh Fiador, V., & Yindenaba Abor, J. (2020). Oil Revenues and Economic Growth in Oil-Producing Countries: The Role of Domestic Financial Markets. Resources Policy, 69.https://doi.org/10.1016/j.resourpol.2020.101832
Muhammad, Z., Jiabin, H., Alam, R., Hazrat, B., Naveed, F., Muhammad, W.,... Ilyas, A. (2021). Nexus Between Foreign Direct Investment, Energy Consumption. International Journal of Energy Economics and Policy, 11(1), 407–416. http://dx.doi.org/10.32479/ijeep.10255
Odhiambo, N. (2009). Energy Consumption and Economic Growth Nexus In Tanzania: An ARDL Bounds Testing Approach. Energy Policy, 617–622. https://doi.org/10.1016/j.enpol.2008.09.077
Pareja, F. (1992). La evolución socioeconómica del Ecuador: modernización sin desarrollo. Seminario Técnico: Comparación analítica de los modelos de desarrollo de los países de pequeña escala de Europa y América Latina. https://bit.ly/45WQ68V
Pazouki, A., & Zhu, X. (2022). The Dynamic Impact Among Oil Dependence Volatility, the Quality of Political Institutions, and Government Spending. Energy Economics, 115.https://doi.org/10.1016/j.eneco.2022.106383
Pesaran, H. (2015). Estimation of ARDL Models. En H. Pesaran, Time Series and Panel Data Econometrics (pp. 121–122). Oxford University Press.
Phillips, P., & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75(2), 347–353. https://bit.ly/3W1huhI
Quinde-Rosales, V., Bucaram-Leverone, R., Saldaña Vargas, M., & Diaz-Campos, C. (2020). Relación entre los ingresos petroleros y el gasto público ecuatoriano. Revista de Ciencias Sociales (Ve), 26 (3), 118–129. https://bit.ly/3LdSQoTRaouf, E. (2021). Oil Prices Shocks and Government Expenditure. International Journal of Energy Economics and Policy, 11 (5), 78–84. https://doi.org/10.32479/ijeep.11172
Sharma, C., & Mishra, R. (2022). On the Good and Bad of Natural Resource, Corruption, and Economic Growth Nexus. Environmental & Resource Economics, 82, 889–992. https://doi.org/10.1007/s10640-022-00694-x
Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework. En R. Sickles & W. Horrace (Eds.), Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications (pp. 281–314). Springer. https://link.springer.com/chapter/10.1007/978-1-4899-8008-3_9
Stock, J., & Watson, M. (2012). Introducción a la econometría. Pearson.
Sultan, Z., & Haque, M. (2018). Oil Exports and Economic Growth: An Empirical Evidence from Saudi Arabia. International Journal of Energy Economics and Policy, 8 (5), 281–287. https://bit.ly/3W9fuoC
Tiba, S. (2019). Exploring the Nexus Between Oil Availability and Economic Growth: Insights from Non-Linear Model. Environmental Modeling & Assessment, 24(6), 691–702. https://doi.org/10.1007/s10666-020-09737-3
Viscarra, H. (2011). Efectos del gasto e inversión pública en el crecimiento económico del Ecuador. FLACSO-Sede Ecuador. https://bit.ly/4eUkdSIZivot, E., & Andrews, D. (2002). Further Evidence on The Great Crash, The Oil-Price Shock, And The Unit-Root Hypothesis. Business & Economic Statistics, 20 (1), 25–44. https://doi.org/10.1198/073500102753410372
Al Kahteeb, T. T., Sultan, Z. A., & Mahmood, H. (2017). Oil Revenue, Public Spending, Gross Domestic Product and Employment in Saudi Arabia. International Journal of Energy Economics and Policy, 7 (6), 27–31. https://bit.ly/3WcdVqc
Al Rasasi, M. H., Qualls, J. H., & Algamdi, B. K. (2019). Oil Revenues and Economic Growth in Saudi Arabia. International Journal of Economics and Financial Research, 5 (3), 49–55. https://doi.org/10.32861/ijefr.53.49.55
Alvarado, R., Cuesta, L., Kumar, P., Rehman, A., Murshed, M., Işık, C., ... Tillaguango, B. (2022). Impact of Natural Resources on Economic Progress: Evidence for Trading Blocs in Latin America Using Non-Linear Econometric Methods. Resources Policy, 79 , 102908. https://doi.org/10.1016/j.resourpol.2022.102908
Bonet-Morón, J. P.-V., & Marín-Llanes, L. (2020). Oil Shocks and Subnational Public Investment: The Role of Institutions in Regional Resource Curse. Energy Economics, 92 https://doi.org/10.1016/j.eneco.2020.105002
Box, G., & Cox, D. (1964). An Analysis of Transformations. Journal of the Royal Statistical Society Series B: Statistical Methodology, 26 (2), 211–243. https://doi.org/10.1111/j.2517-6161.1964.tb00553.x
Cai, C.-H., Lu, Z.-H., & Zhao, Y.-G. (2020). Moment Method with Box–Cox Transformation for Structural Reliability. Journal of Engineering Mechanics, 146 (8) https://doi.org/10.1061/(ASCE)EM.1943-7889.0001824
Cardoso, P., & Chavez, H. (2023). Booms petroleros, quimeras de transformación productiva y el retorno de Washington. Revue Internationale Des Études Du Développement, 203–233. https://doi.org/10.4000/ried.8179
Carrillo, P. (2017). El efecto de la política fiscal en expansión y recesión para Ecuador: un modelo MSVAR. Cuadernos de Economía, 36 (71), 405–439. https://doi.org/10.15446/cuad.econ.v36vn72.53570
Cuenca, A., & Ochoa Jiménez, D. (2017). Economic Growth and Natural Resources in Latin America: An Application of the Stiglitz Model. ECORFAN Journal-Republic of Paraguay, 3–5. https://bit.ly/3XTEBNA
Damette, O., & Seghir, M. (2018). Natural Resource Curse in Oil Exporting Countries: A Nonlinear Approach. International Economics , 231–246. https://doi.org/10.1016/j.inteco.2018.04.001 Un análisis de la dinámica interrelacional entre crecimiento económico, gasto público e ingresos petroleros: caso ecuatoriano (1970-2022) 96 Erika Arce Alfredo Loja Luis Sarmiento
Enders, W. (2015). Applied Econometric Time Series (4th ed.). John Wiley & Sons, Inc.
Engle, R., & Granger, C. (1987). Co-integration and Error Correction: Representation, Estimation, and Testing. Econometrica , 251–276. https://doi.org/10.2307/1913236
Engle, R., & Yoo, B. (1987). Forecasting and Testing in Co-Integrated Systems. Journal of Econometrics, 35 (1), 143–159. https://doi.org/10.1016/0304-4076(87)90085-6
Eregha, P., & Mesagan, E. (2020). Oil Resources, Deficit Financing and Per Capita GDP Growth in Selected Oil-Rich African Nations: A Dynamic Heterogeneous Panel Approach. Resources Policy, 66. https://doi.org/10.1016/j.resourpol.2020.101615
Fubara, S., Iledare, O., Gershon, O., & Ejemeyovwi, J. (2019). Natural Resource Extraction And Economic Performance of the Niger Delta Region in Nigeria. International Journal of Energy Economics and Policy, 9 (4), 88–193. https://doi.org/10.32479/ijeep.7716
Granger, C. (1988). Some Recent Development in a Concept of Causality. Journal of Econometrics, 199–211. https://doi.org/10.1016/0304-4076(88)90045-0
Gruss, B. (2014, junio 12). América Latina: creciendo sin la locomotora de los commodities. IMF blog-Ideas y análisis sobre economía y finanzas. https://www.imf.org/es/Blogs/Articles/2014/06/12/3991
Guichay, M., Vacacela, J., & León, L. (2022). Ecuador: análisis del crecimiento económico y el sector público no financiero período 2012-2020. Espíritu Emprendedor TES, 6(1), 51–69. https://doi.org/10.33970/eetes. v6.n1.2022.297
Hassan, A. S. (2021). Asymmetric Effects of Oil Revenue on Government Expenditure: Insights from Oil-Exporting Developing Countries. OPEC Energy Review, 45 (2), 257–274. https://doi.org/10.1111/opec.12203
Jarque, C., & Bera, A. K. (1987). A Test for Normality of Observations and Regression Residuals. International Statistical Review , 163–172.
Johansen, S. (1988). The Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12 , 231–254. https://doi.org/10.1016/0165-1889(88)90041-3
Johansen, S. (1995). Likelihood-Based Inference in Cointegrated Vector Autoregressive Models . Oxford University Press.
Kartsonakis, D., & Dritsakis, N. (2020). A Note on the Use of the Box-Cox Transformation For Financial Data. International Journal of Computational Economics and Econometrics, 10 (4), 419–422. https://doi.org/10.1504/IJCEE.2020.110755
Kripfganz, S., & Schneider, D. (2023). Estimating Autoregressive Distributed Lag and Equilibrium Correction Models. The Stata Journal, 23(4), 983–1019. https://doi.org/10.1177/1536867X231212434
Kwiatkowski, D., Phillips, P., Schmidt, P., & Shin, Y. (1992). Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root? Journal of Econometrics, 54(1–3), 159–178. https://doi.org/10.1016/0304-4076(92)90104-Y
Lütkepohl, H., & Krätzig, M. (2004). Applied Time Series Econometrics. Cambridge University Press.
Mahadeva, L., & Robinson, P. (2004). Unit Root Testing to Help Model Building. En A. Blake & G. Hammond (Eds.), Handbooks in Central Banking. Centre for Central Banking Studies, Bank of England.
Martin-Mayoral, F., & Carvajal, A. (2023). Direct and Indirect Impacts of Oil Price Shocks on Ecuador’s Economic Cycles (2000:01–2020:01). Estudios de Economía, 50 (2), 379–412. https://doi.org/10.4067/S0718-52862023000200379
Mauricio, J. A. (2007). Introducción al análisis de series temporales. Universidad Complutense de Madrid.
Mehrara, M. (2008). The Asymmetric Relationship Between Oil Revenues and Economic Activities: The Case of Oil-Exporting Countries. Energy Policy, 1164–1168. https://doi.org/10.1016/j.enpol.2007.11.004
Mohammed, J. I., Karimu, A., Ogeh Fiador, V., & Yindenaba Abor, J. (2020). Oil Revenues and Economic Growth in Oil-Producing Countries: The Role of Domestic Financial Markets. Resources Policy, 69.https://doi.org/10.1016/j.resourpol.2020.101832
Muhammad, Z., Jiabin, H., Alam, R., Hazrat, B., Naveed, F., Muhammad, W.,... Ilyas, A. (2021). Nexus Between Foreign Direct Investment, Energy Consumption. International Journal of Energy Economics and Policy, 11(1), 407–416. http://dx.doi.org/10.32479/ijeep.10255
Odhiambo, N. (2009). Energy Consumption and Economic Growth Nexus In Tanzania: An ARDL Bounds Testing Approach. Energy Policy, 617–622. https://doi.org/10.1016/j.enpol.2008.09.077
Pareja, F. (1992). La evolución socioeconómica del Ecuador: modernización sin desarrollo. Seminario Técnico: Comparación analítica de los modelos de desarrollo de los países de pequeña escala de Europa y América Latina. https://bit.ly/45WQ68V
Pazouki, A., & Zhu, X. (2022). The Dynamic Impact Among Oil Dependence Volatility, the Quality of Political Institutions, and Government Spending. Energy Economics, 115.https://doi.org/10.1016/j.eneco.2022.106383
Pesaran, H. (2015). Estimation of ARDL Models. En H. Pesaran, Time Series and Panel Data Econometrics (pp. 121–122). Oxford University Press.
Phillips, P., & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75(2), 347–353. https://bit.ly/3W1huhI
Quinde-Rosales, V., Bucaram-Leverone, R., Saldaña Vargas, M., & Diaz-Campos, C. (2020). Relación entre los ingresos petroleros y el gasto público ecuatoriano. Revista de Ciencias Sociales (Ve), 26 (3), 118–129. https://bit.ly/3LdSQoTRaouf, E. (2021). Oil Prices Shocks and Government Expenditure. International Journal of Energy Economics and Policy, 11 (5), 78–84. https://doi.org/10.32479/ijeep.11172
Sharma, C., & Mishra, R. (2022). On the Good and Bad of Natural Resource, Corruption, and Economic Growth Nexus. Environmental & Resource Economics, 82, 889–992. https://doi.org/10.1007/s10640-022-00694-x
Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework. En R. Sickles & W. Horrace (Eds.), Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications (pp. 281–314). Springer. https://link.springer.com/chapter/10.1007/978-1-4899-8008-3_9
Stock, J., & Watson, M. (2012). Introducción a la econometría. Pearson.
Sultan, Z., & Haque, M. (2018). Oil Exports and Economic Growth: An Empirical Evidence from Saudi Arabia. International Journal of Energy Economics and Policy, 8 (5), 281–287. https://bit.ly/3W9fuoC
Tiba, S. (2019). Exploring the Nexus Between Oil Availability and Economic Growth: Insights from Non-Linear Model. Environmental Modeling & Assessment, 24(6), 691–702. https://doi.org/10.1007/s10666-020-09737-3
Viscarra, H. (2011). Efectos del gasto e inversión pública en el crecimiento económico del Ecuador. FLACSO-Sede Ecuador. https://bit.ly/4eUkdSIZivot, E., & Andrews, D. (2002). Further Evidence on The Great Crash, The Oil-Price Shock, And The Unit-Root Hypothesis. Business & Economic Statistics, 20 (1), 25–44. https://doi.org/10.1198/073500102753410372