Investigating the Theoretical Relationship Between Political Instability and Political Business Cycle in an Oil Country

Abstract

Injecting rental sector revenues such as oil revenues in addition to the effects on the economic organ can also affect the political sectors. A significant part of political-economic studies in such countries has been related to the economic and political effects of the rent sector. In this paper, the authors proposed a theoretical model to describe the search for the causes of business cycles in a rentier economy. They believe that the economic structure and oil budget are in the form of political-business cycles of the opportunistic model, which in countries with rent-seeking economies, is a structural and permanent part of their economy and plays an important role in economic-political structure and decision-making. The results showed that, political instability due to the gap between the nation-state relationship, which is resultant of t dependency of the government budget on the revenues of the dominant (oil) sector in rented countries, and among other factors can lead to economic fluctuations and busines cycles. This instability, along with the traditional and supply-side approaches, can play an important role in explaining the causes of business cycles. Fluctuations in the rent sector can also lead to a new type of political- business cycle that is rooted in the structure of the state's oil budget and rent. In other words, the existing political-business cycles are due to the event and time of the election, while the new political- business cycles are a permanent phenomenon as long as the state budget depends on the revenues of the rent sector in the economy.

Keywords

• political- business cycles
• rentier state
• political instability
• oil revenues