Abstract
Oil price volatility has increased tremendously in the last decade and has become the most difficult commodity to predict. The price of Brent crude oil was 42 US dollars in 2020, whereas it is 72 dollars today. All countries are adversely affected by this volatility. But the severity of it differs between countries. Especially oil-exporting countries are expected to be affected more negatively. Among the countries bordering the Caspian Sea, the national incomes of Russia, Iran, Kazakhstan, and Azerbaijan are largely based on oil exports; therefore they are heavily affected by the volatility in oil prices. Therefore, energy security, which is one of the most important international security topics, is a political and economic priority for the countries bordering the Caspian Sea. In this study, the effects of the price changes in Brent crude oil on the economic growth and energy security of these countries were examined using Panel data analysis with the quarterly data for the period 2007-2020. The order of integration of the variables discussed in the study is examined using the Pesaran (2007) panel unit root test, which takes the cross-sectional dependence into account. The long-term relationship between Brent oil price and economic growth is examined using the Westerlund (2007) cointegration test. The results show that oil prices affect economic growth.Keywords: Countries Bordering the Caspian Sea, Oil Prices, Economic Growth, Panel Cointegration TestJEL Classications: C33, O47, P42, Q41DOI: https://doi.org/10.32479/ijeep.11835
Highlights
The most cited work on the impact of oil prices on economic growth is Hamilton’s (1983)
This study investigated the long-term relationship between the Real GDPs of 4 oil-exporting countries bordering the Caspian Sea and the Brent oil price using the Westerlund (2007) cointegration test and Pedroni (2001) DOLS methods for the 2007-2020 period
The presence of CSC among the countries making up the panel was investigated using the LMadj test developed by Berusch-Pagan (1980) and corrected by Peseran and Yamagata (2008)
Summary
The most cited work on the impact of oil prices on economic growth is Hamilton’s (1983). Hamilton states that seven of the eight economic recessions in the United States happened due to overpricing of oil This finding has led to a rapid increase in empirical studies on oil-importing developed countries. Thanks to new technological developments, shale gas and shale oil extraction costs have decreased, production has increased This affects the balance of supply and demand in the global oil market and caused the oil price to decrease. While a decrease in oil price is good news for oil-importing countries, it is bad for oil-exporting countries Because their economies have become dependent on high oil prices, the countries bordering the Caspian Sea are not very happy with this situation.
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