Objective - The preceding three years (2014, 2015, and 2016) saw a drop in the price of oil which has impacted all parts of Omani macroeconomic life. This study aims to identify the association between oil price changes and aggregate household consumption expenditure in the Sultanate by analyzing the long term relationship between the variables of interest.

Methodology/Technique - The (ARDL) Autoregressive Distributed Lag bound test of co-integration is used with 27 annual observations obtained between 1990 and 2016.

Finding - The statistical results show that there is a long term, positive relationship between the two variables.

Novelty – As Oman is heavily dependent on oil, any fluctuation in the price of oil will undoubtedly cause instability in the economy (macroeconomic variables) demonstrating the presence of a robust correlation between consumption and oil prices. The bound test of the ARDL approach demonstrates this relationship. This study is therefore useful for Muscat officials to identify ways to reduce the dependency on oil.

Type of Paper - Empirical.

Keywords: Total Household Consumption Expenditure; Crude Oil Price; Autoregressive Distributed Lag (ARDL); Omani Economy.

JEL Classification: D1, D13, D19, E30.

URI: http://gatrenterprise.com/GATRJournals/JBER/vol4.2_3.html

DOI: https://doi.org/10.35609/jber.2019.4.2(4)

Pages 97-104