DOES CRUDE OIL PRICES HAVE EFFECT ON EXPORTS, IMPORTS AND GDP ON BRICS COUNTRIES? - AN EMPIRICAL EVIDENCE

Shripad Ramchandr Marathe,Guntur Anjana Raju

doi:10.32479/ijeep.10018

Shripad Ramchandr Marathe, Guntur Anjana Raju

Open Access

https://doi.org/10.32479/ijeep.10018

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Abstract

The complexity of the World Oil market has risen significantly in recent years and today’s Oil prices require new methods to consider, model and forecast. In addition to the start of the Oil markets financialization era, structural changes have occurred on the global Oil market. This paper presents a simple framework for understanding the effect of oil prices on BRICS countries’ macroeconomic variables over a period of time from January 1, 2000 to December 31, 2019 using the Cointegration, vector error correction model (VECM) and granger causality test. Our analysis shows that there is a long-term relationship between the Macroeconomic variables and Crude Oil, and also suggests that there is a uni-directional and bi-directional relationship between the variables in BRICS.

Highlights

BRIC has officially existed since 2001, when Goldman Sachs Investment Bank analyst coined the term to tie together fastgrowing economies and fairly broad internal markets
The main purpose of this paper is to investigate the causal relation between the prices of crude oil and the macroeconomic variables of BRICS countries
BRICS considered as a major economic cluster of countries in the whole world

Summary

Introduction

BRIC has officially existed since 2001, when Goldman Sachs Investment Bank analyst coined the term to tie together fastgrowing economies and fairly broad internal markets. Given BRICS, its importance in global politics is increasing quite quickly. The association has a few problems that need to be resolved in the economic sphere, such as its members’ lack of orientation towards internal trade and investment activity, its significance in terms of global political leverage is crucial. As per the (EIA, 2019) Russia, China and Brazil are in the top ten largest oil producers in the world (Figure 1). China and Brazil produce 4.89 mb/d (8.58 quad)and 3.67 mb/d (5.59 quad) respectively which contributes 9% of total world share in production of crude oil. ; BP Statistical Review of World Energy, (2018) on the consumption side China, India, Russia and Brazil are the biggest consumers of the crude oil. Investors and policymakers in the BRICS would like, in order to gain diversification advantages and reduce risks, to understand how to compare C rude Oil with the BRICS macroeconomic variables

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