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Understanding dollar dynamics and SME performance in GCC economies

Nadia Yusuf (Department of Economics, Faculty of Economics and Administration, King Abdulaziz University, Jeddah, Saudi Arabia)
Inass Salamah Ali (Dar Al-Hekma School of Business and Law, Dar Al-Hekma University, Jeddah, Saudi Arabia)
Tariq Zubair (Department of Management, Jazan University, Jazan, Saudi Arabia)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 24 April 2024

73

Abstract

Purpose

This study investigates the impact of US dollar volatility and oil rents on the performance of small and medium-sized enterprises (SMEs) in the Gulf Cooperation Council (GCC) region, with an emphasis on understanding how these factors influence SME financing constraints in economies with fixed currency regimes.

Design/methodology/approach

Employing a random effects panel regression analysis, this research considers US dollar volatility and oil rents as independent variables, with SME performance, measured through the financing gap, as the dependent variable. Controls such as trade balance, inflation deltas and gross domestic product (GDP) growth are included to isolate their effects on SME financing constraints.

Findings

The study reveals a significant positive relationship between dollar volatility and the financing gap, suggesting that increased volatility can exacerbate SME financing constraints. Conversely, oil rents did not show a significant direct influence on SME performance. The trade balance and inflation deltas were found to have significant effects, highlighting the multifaceted nature of economic variables affecting SMEs.

Research limitations/implications

The study acknowledges potential biases due to omitted variables and the limitations inherent in the use of secondary data.

Practical implications

Findings offer pertinent guidance for SMEs and policymakers in the GCC region seeking to develop strategies that mitigate the impact of currency volatility and support SME financing.

Originality/value

The research provides new insights into the dynamics of SME performance within fixed currency regimes, which significantly contributes to the limited literature in this area. The paper further underscores the complex connections between global economic factors and SME financial health.

Keywords

Citation

Yusuf, N., Ali, I.S. and Zubair, T. (2024), "Understanding dollar dynamics and SME performance in GCC economies", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-01-2024-0127

Publisher

:

Emerald Publishing Limited

Copyright © 2024, Emerald Publishing Limited

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