Oil price movements and macroeconomic performance: Evidence from twenty-six OECD countries

Abstract

This study investigates the relationship between oil price movements and macroeconomic aggregates, such as gross domestic product (GDP), consumer prices (CPI), and unemployment, for OECD countries. To do this, second generation econometric methods have been employed to panel data including panel unit root tests, panel cointegration tests, and panel long-run models. Panel unit root tests suggest that oil prices plus selected macroeconomic aggregates in OECD countries are non-stationary at levels but become stationary at first differences in the existence of multiple structural breaks. Five structural break points have successfully been investigated in the series of this study during panel unit root and panel cointegration tests. Durbin–H panel co-integration tests confirm that there is a long-term relationship between oil prices and those macroeconomic aggregates. On the other hand, results of this study reveal that the price of oil exerts statistically and negatively significant impacts on GDP, CPI, and unemployment in the case of OECD countries in general.