The Relationship between Crude Oil Prices and the Gross Domestic Product, Inflation, and Unemployment: Evidence from Jordan

Abstract

The primary goal of this study is to assess the effect of oil prices on Jordan's gross domestic product, inflation, and unemployment. The GDP represents a summation of gross value added via all resident producers in the economy and any product taxes not involved in the evaluation of output, divided by mid-year population. While the concept of unemployment denotes to the portion of the labor force that is without work but available for and looking for employment, as well as to inflation as stately by the consumer price index by using quarterly time series data from 2000 to 2021. The study employs an autoregressive distributed lag (ARDL) equations system or a multivariate ARDL model to analyze the relationship. The findings indicate that in panel A, the ARDL(0,0) results suggest the absence of both short-term and long-term effects of oil prices on GDP, inflation, and unemployment. Conversely, panel B demonstrates that there are no immediate or prolonged impact of oil prices on unemployment (UNE) based on the ARDL(1,0) analysis. However, in panel C, the ARDL-ECM (1,0) highlights the existence of short-term and long-term impacts on inflation by oil prices. Decision makers in the Jordanian economy could employ the outcomes of this study to formulate the suitable policies that assist in dealing with the quantities of the oil imports from different countries which will directly affect in minimizing unemployment rates among Jordanians.