How does purchasing power in OPEC countries respond to oil price periodic shocks? Fresh evidence from Quantile ARDL specification

Abstract

AbstractThis study provides new insights on the dynamics of oil price shocks and purchasing power (PP) in the top six OPEC economies using the Quantile ARDL modelling technique. Notably, previous studies were largely silent about the impact of oil price periodic shocks on PP. To fill this gap, we used quarterly data of oil prices and PP from 1990Q1 to 2019Q4 drawn from relevant data hosts. Empirical evidence reveals that the effects of oil price shocks vary across the distributions of PP in all the countries. Equally, there is evidence of long‐run asymmetric pass‐through from oil prices to PP in Saudi Arabia, whereas, short‐run asymmetric effects were recorded in Nigeria, and UAE. Also, evidence indicates that PP in Saudi Arabia, Nigeria and Angola experience a sharp decline in response to persistent oil price shocks. Additionally, PP in UAE and Algeria witnessed momentary boosts only at quantiles above the mean; however, it fizzles out thereafter. In Kuwait, there is evidence of short‐run boost without corresponding long‐run effects. The findings of this study have important policy implications.