Growth Dynamics in Qatar: Short-Run Volatility and Long-Run Stability under Monetary and Inflation Shocks

Abstract Purpose: This study investigates the short-run volatility and long-run stability of Qatar’s economic growth under monetary and inflationary shocks during the period 1980–2024. The analysis focuses on the role of inflation, money supply, real interest rates, and foreign direct investment (FDI) in shaping growth dynamics. Methods The study applies the Autoregressive Distributed Lag (ARDL) bounds testing procedure to examine cointegration, followed by the Error Correction Model (ECM) to capture short-run adjustments. Impulse response functions (IRFs) are employed to trace the dynamic responses of growth to monetary and inflationary shocks. Results Findings reveal that inflation and money supply exert marginal but adverse effects on long-run growth, while FDI significantly enhances long-term expansion. Real interest rates, although contractionary in the short run, contribute positively to growth in the long run by improving capital allocation. Short-run dynamics exhibit oscillatory responses, particularly in inflation and FDI, highlighting Qatar’s vulnerability to both external and domestic shocks. Implications The results suggest that sustaining long-term resilience requires prudent inflation management, calibrated liquidity expansion, and stable FDI inflows. Policymakers should balance short-run stabilization measures with structural reforms that strengthen the economy’s capacity to absorb shocks while maintaining steady growth. JEL Classification: C32, E31, E44, F43, O47