Effects Of Oil Price Fluctuations Research Articles

Oil Price and Long-run Economic Growth in Oil-importing Developing Countries

The recent spikes in oil prices are a significant setback for the world economy, which has already faced multiple challenges due to the COVID-19 pandemic. This is particularly concerning for developing countries as maintaining a sustained growth in real GDP is crucial for lifting their population out of poverty. While the short-run negative macroeconomic effects of a spike in oil prices are well established in the context of the developed world, the long-run growth effect has received little attention, especially in developing countries. Using the World Bank's development indicators database covering the period 1990 to 2020, this study aims to investigate the oil price-growth nexus in low and middle-income net oil-importing countries to shed light on how oil price increases could be a challenge for sustainable development. Specifically, we first set up a theoretical model to establish the relationship between growth in output per capita and oil price. Following the traditional growth regression approaches, we empirically estimate the causal effect of growth in oil prices on the economic growth of 65 net oil-importing developing countries using fixed effect panel IV regression methods. The empirical results confirm statistically significant negative effects of oil prices, indicating that a higher oil price reduces long-run economic growth in oil-importing developing countries. Our results on the other determinants of growth are consistent with the existing empirical growth literature. Oil-importing developing countries, therefore, must allocate resources towards alternative domestic energy sources, in addition to pursuing fuel efficiency and conservation strategies, to mitigate the negative effects of oil price fluctuations on their long-run economic output and uphold sustainable development.

Volatility Transmission between Oil Price and Exchange Rate

This article presents a study on the transmission of oil price volatility to the exchange rates of 14 countries (net oil exporters and importers) during the period from 02/01/2000 to 31/11/2022. The aim is to compare the effect of oil price fluctuations on exchange rate volatility based on the country's nature. Using ARCH, GARCH, and GARCH-BEKK models, our results reveal that the real effective exchange rate is significantly linked to fluctuations in the real oil price for both categories of countries: oil importers and exporters. These findings have important implications for monetary, fiscal, inflationary, and trade policies for these countries.

Spillover Effects of Oil Price Fluctuations on the U.S and Asia–Pacific Stock Markets: A Multivariate EGARCH Analysis

Spillover Effects of Oil Price Fluctuations on the U.S and Asia–Pacific Stock Markets: A Multivariate EGARCH Analysis

Macroeconomic Impacts of Oil Price Shocks: Evidence from Iraq by Using Vector Autoregressive Model

Based on a VAR framework, Granger Causality Tests, Impulse Response Function and Variance Decomposition analysis on the annual data from 1970 to 2021, This study aims to demonstrate the effect of oil price fluctuations on GDP, imports, international reserves, and exports in Iraq. The Granger causality results demonstrated a unidirectional connection moving from oil price to imports, exports, international reserves, and GDP, this is an inevitable result because oil prices are determined in the international markets according to specific factors that do not include local economic variables. The variance decomposition result indicated that oil price changes are an important source of variation in the studied variables. Finally, the results of the impulse response function indicated that fluctuations in oil prices significantly impact GDP, exports, imports, and international reserves in Iraq. Therefore, we suggest that economic policymakers work seriously to develop practical plans to diversify the Iraqi economy instead of relying too heavily on oil revenues, which are characterized by sharp and continuous volatility, to avoid the negative effects of these fluctuations on the main macroeconomic variables in Iraq.

Disturbing Effects of Global Oil Price Changes: Case of Azerbaijan

General topic in this paper is the role of oil industry in global economy and the result of changing oil prices on economic variables in Azerbaijan. The major aim is to analyze the effects of crude oil price changes on Azerbaijan economy in order to measure how changes in oil prices affect its basic economic variables. At the beginning, a general outlook on oil industry will be given and the main oil exporting economies will be analized. However, main focus will be on the structure of Azerbaijan’s economy and it will examine the example of Azerbaijan as a transition economy where oil and gas production and exports have steadily increased from the mid ‘90s. Many critical oil and gas extraction projects have been implemented; while the oil and gas sector's dominance in the economy poses a number of threats to the balanced development of the country's economy. It will show how the economy of Azerbaijan was affected after the oil crisis, such as other developing countries that mainly depending on oil and petroleum products. For this purpose, VEC Model has been applied, consdering Azerbaijan Statistic Data and analized the effects of oil price fluctuations on its economic variables parallel with the oil industry. The main findings indicate that Azerbaijan's economy is strongly dependent on resource exports, which produce high growth rates when commodity prices are favorable, but end up with lower macroeconomic performance when global oil prices fall. It is clear that the main income of Azerbaijan comes from oil and oil products, so the export of oil will have a high impact on the saving level of the population. At the time of high revenues come from export and the low exchange rate of the foreign currency in Azerbaijan has also led to the low cost of imported goods. As well demonstrated in the research, Azerbaijan economy has been widely exposed to major crude oil price distortions. It can be said that in order to avoid increasing overdependence on oil earnings, diversifying the economy should be a top priority.

AN ARDL ANALYSIS ON THE EFFECT OF OIL PRICE INSTABILITY ON FOREIGN RESERVE IN NIGERIA (2015-2022)

The paper employed auto regressive distributive lag (ARDL) model to examine the effect of oil price instability on foreign reserve in Nigeria using recent monthly time series data over the period of 2015-2022. The results of ARDL Bound cointegration indicated a presence of cointegration in the model which confirms an existence of long run relationship between oil price instability and foreign reserve. The findings of ARDL long run analysis show that oil price instability have negative and significant effect on foreign reserve. Likewise, inflation rate has a negative and significant effect on foreign reserve. On the other hand, oil revenue is found to have a positive and significant effect on foreign reserve. Furthermore, the ARDL short run estimates indicate that an existence of a short run relationship between oil prices and foreign reserve. From the findings, the coefficient of error correction term indicates that about 30% of the discrepancy between the actual and the long run or equilibrium value of foreign reserve is corrected or eliminated each month. Furthermore, the results of granger causality test indicate a unidirectional causality between oil price instability and foreign reserve. Based on the empirical findings, the paper suggests the need for the policy makers to adopt policy framework that will get rid of corruption and ensure macroeconomic stability. Policymakers should also take steps to mitigate the negative effects of oil price fluctuations on foreign reserve in Nigeria.

Oil Price Spillover Effects to the Stock Market Sentiment: The Case of Higher vs. Lower Oil Import EU Countries

The process of deepening the economic integration of European economies reached its peak with the formation of a supranational entity for conducting monetary policy. However, the high degree of financial integration of the market also implied the vulnerability of the economic union in terms of prompt reaction to external shocks with divergent effects. Oil price fluctuations are of essential importance for macroeconomic performance, which is particularly reflected in countries more dependent on the import of this raw material. This research aims to apostrophize the asymmetric effects of oil price fluctuations on the stock market indices on a sample of higher (Germany, Italy, France) vs. lower (Croatia, Bulgaria, Ireland) oil importers. The empirical findings are determined based on impulse response functions derived from the VAR model as well as the Granger causality test of the relationship between stock market indices and oil price fluctuations. In order to identify the isolated impact of oil price movements on stock market indices of selected European economies, the VAR (Vector AutoRegression) model is evaluated in the time period 2013M1-2023M1. The results of the research indicate an asymmetric mechanism of the impact of oil shocks on the financial markets of EU member states.

Transmission Mechanisms of Oil Price Fluctuations on Prices

This paper aims to understand the effects of oil price fluctuations on the real economy and prices, using an ARDL model with quarterly data from 2007 to 2021. The results will help policy makers and economic actors to better understand the transmission mechanisms of oil price fluctuations on the economy and prices, which is important for oil-dependent economies like Morocco. The question is to what extent do oil price fluctuations affect the real economy and price levels in oil import-dependent countries, with a particular focus on the case of Morocco?. The results of the study show that the impact of economic variables on price levels depends on the duration. In the short run, economic growth has a limited inflationary effect, oil price fluctuations have a significant inflationary impact, the nominal exchange rate does not have a significant impact and the openness of the economy does not have a significant impact. In the long run, oil price fluctuations, the real effective exchange rate, and the rate of economic openness have a significant inflationary effect, while economic growth also has an inflationary effect. The competitiveness of the Moroccan economy is important for the stability of price levels in the long run

Effect of Oil Price Fluctuations on Nigeria's Exchange Rate Movements

Effect of Oil Price Fluctuations on Nigeria's Exchange Rate Movements

The Transmission Mechanisms and Impacts of Oil Price Fluctuations: Evidence from DSGE Model

This paper constructs an open economy dynamic stochastic general equilibrium (DSGE) model with oil to investigate the transmission mechanism and impact effects of oil price fluctuations driven by different factors on China’s macroeconomy using quarterly data from 1996 to 2019. The results show that the international crude oil supply-driven oil price decline promotes positive output growth in the short run through the positive cost effect of the supply channel, and the production regulation cost will dampen the incentive to invest in the new energy sector in the long run. Domestic economic development demand-driven oil price increases act on the demand channel, driving output and oil prices to fluctuate in the same direction, generating a negative real balance effect on the economy through the interest rate channel. The oil-specific demand driven by foreign nominal interest rate shocks is transmitted through the exchange rate channel, triggering imported inflation, lower aggregate demand, and lower output. Different sources of oil price fluctuations have different transmission mechanisms and thus differential effects. For this reason, based on the root causes of oil price fluctuations, policy recommendations to deal with international oil price fluctuations in the new situation are proposed at the supply level, demand level, and international level.

Whose jobs face transition risk in Alberta? Understanding sectoral employment precarity in an oil-rich Canadian province

ABSTRACT Labour markets of oil-exporting regions will be impacted by a global transition to low-carbon energy as oil demand reduces to meet the aims of the Paris Agreement. Together with direct job losses in the oil and gas industry, indirect employment effects on other sectors should also be considered to ensure a just transition. We explore these direct and indirect employment impacts that could result from the low-carbon transition by analysing the effect of oil price fluctuations on the labour market of Alberta, a Canadian province economically reliant on oil sands extraction. We employ a mixed methods approach, contextualizing our quantitative analysis with first-hand experiences of career transitions using interviews with oil sands workers. We estimate a vector autoregression for province-wide insights and explore sector-specific dynamics using time series regressions. We find that the price discount on Canadian oil sands, which is determined by local factors like crude oil quality and pipeline capacity, does not significantly affect employment, while the global oil price does. This finding puts in doubt claims of long-term employment benefits from new pipelines. We find that at a provincial scale, oil price fluctuations lead to employment levels also fluctuating. Our analysis at the sectoral level shows that these job fluctuations extend beyond oil and gas to other sectors, such as construction and some service sectors. These findings suggest that the province’s current economic dependence on oil creates job precarity because employment in various sectors is sensitive to a volatile oil market. Furthermore, due to this sectoral sensitivity to oil price changes, workers in these sectors may be especially at risk in a low-carbon transition and warrant special attention in the development of provincial and national just transition policies. Transitional assistance can support workers directly, while economic diversification in Alberta can reduce reliance on international oil markets and thereby ensure stable opportunities in existing and new sectors. Key policy insights Decreased global oil demand is likely to create employment risks for workers in Alberta and other fossil fuel producing regions of the world. Current economic dependence on oil sands extraction in Alberta leads to job precarity across sectors, including in those seemingly unrelated to extraction. Proactive economic diversification in anticipation of the low-carbon transition could reduce precarity by mitigating the effects of oil price fluctuations on employment levels in the long term. Workers in sectors with higher oil price sensitivity (i.e. oil and gas, construction, professional services, manufacturing, accommodations, and food services sectors) could be prioritized in coordinated just transition policies at the local, provincial, and national scales. The details of career transitions gleaned from our interviews suggest that tripartite social dialogue would contribute meaningfully to just transition policy development.

Heterogeneous effects of oil price fluctuations: Evidence from a nonparametric panel data model in Canada

In this paper, we employ a nonparametric panel data technique to examine the impacts of oil price fluctuations on GDP per capita in two groups of oil-exporting and oil-importing provinces in Canada over the period 1984–2016. This technique allows the trend and coefficient functions to vary over the sample period as unknown functional forms. The results show that the relationship between oil price and GDP per capita is time-varying in both groups of Canadian provinces. While both groups of provinces benefited from the striking oil price hike of the 2000s, the relatively low oil prices before 2000 had positive effects only in oil-importing provinces. Our results highlight the vital role of interprovincial trade in mitigating the adverse effects of oil price volatility on the Canadian provinces.

Impact of Oil Price Fluctuations on Economic Growth, Financial Development, and Exchange Rate in Iraq: Econometric Approach

Oil is the main source of energy, which plays a pivotal role in the global economy. Therefore, its price fluctuations have a significant impact on the economy of the countries that trade oil. The objective of this study is to investigate the effects of oil price fluctuations on economic growth, financial development and exchange rate in Iraq. To achieve this objective, IRFs and VDCs, which are estimated from VAR, have been used. This study found that great fluctuations in economic growth, financial development, and exchange rate are due to oil price fluctuations. It is a reflection of oil resource mismanagement besides the rampant corruption in the state administrations additional to allocating most of financial resources to the war efforts when Iraq fought against terrorism. Therefore, it is necessary for the decision makers to adopt a certain strategy based on reducing the dependence of the Iraqi economy on crude oil. Prompting financial sector by developing well-regulated economic policies of economic diversity is needed as well. It could be done institutionally by regulating frameworks to build confidence in the economy and reducing the dominance of the public sector.

Effect of Oil Prices Fluctuation on Stock Indices-Comparative Study

The study aims to examine the nature of the relationship and the effect of oil price fluctuations on stock indices in the financial markets of exporting and importing countries. For achieving that, the price of Brent crude oil was chosen as an index from the stock markets in Saudi Arabia, Russia and Iraq as oilexporting countries. While the market index was chosen from the markets of New York, Shanghai and Nikkei as an oil importer. The study came out with a set of conclusions and recommendations. The most important is that the degree of response of stock indices to fluctuations in oil prices was greater in exporting countries than in importing countries.

Effect of oil price fluctuations on the components of total spending in Saudi Arabian economy during the period 2000-2018: Empirical study: دراسة قياسية لمقارنة أثر تقلبات أسعار النفط على مكونات الإنفاق الكلي في الاقتصاد السعودي خلال الفترة 2000 - 2018

The study aimed to analyze the relationship between oil price changes and all components of total spending in the Kingdom of Saudi Arabia during the period 2000-2018, to determine which of the spending components are most related to oil price changes and to evaluate the performance of the financial policy followed in the Kingdom during that period, and the study used both approaches analytical descriptive and standard approach to achieve this goal, and the study found an average direct correlation of (0.52) between changes in average oil and government final consumption spending, and a moderate direct correlation also between average oil prices and private consumption spending of (0.43). And a moderate to strong positive relationship between average oil prices and government investment spending estimated at (0.65), and a moderate to strong inverse relationship between average oil prices and external spending in the Kingdom, estimated at (-0.67), and the study demonstrated the existence of a direct causal relationship between oil price changes. The study also demonstrated the government's final consumption spending in the Kingdom in the short term, using Granger tests of causation, With no direct causal relationship in the short term between average oil prices and the rest of the components of total spending, and by using simple linear regression analysis between each of the average oil prices as an independent variable and between all spending components as variables separately to test the relationship in the long term, it is proved that oil prices explain Simple to moderate changes in the components of total spending, which indicates that the Kingdom, like most oil-producing countries, has adopted, during the past few decades, anti-economic financial policies, away from the negative effects of instability of oil prices, especially with regard to investment spending, which in turn is reflected in the completion of Continuous successive development plans and maintaining near-sustainable economic growth rates.

Crude oil prices and macroeconomic activities: a structural VAR approach to Indonesia

ABSTRACT The effects of oil price fluctuations on growth, inflation, and exchange rates for Indonesia are investigated in the framework of the structural vector autoregressive (SVAR). To identify linking oil prices to the macroeconomic activities accurately, the entire sample period is separated into two sub-samples such as the era of net oil exporter (1998:M1-2003:M12) and the era of net oil importer (2004:M1-2019:M4). In the era of net oil exporter, we discover that a surge in oil prices promotes growth and contributes to appreciating the Indonesian currency. In the era of net oil importer, by contrast, an upsurge in oil prices reduces growth and causes a depreciation of the exchange rate. However, there is little evidence that an upswing in oil prices in both eras has a significantly detrimental effect on inflation.

Oil price and the economic activity in GCC countries: evidence from quantile regression

Research background: The effects of oil price fluctuations on the macroeconomic performance in oil-importing and oil-exporting countries have stimulated considerable research activity. However, the debate is far from being closed.
 Purpose of the article: This paper revisits the impact of crude oil price on economic activity in the Gulf Cooperation Council oil-exporting countries. The study covers a relatively long period spanning from 1960 to 2018.
 Methods: The empirical investigation accounts for structural breaks, nonlinearity, and non-normal ?distribution of data. The Kapetanios (2005) structural breaks unit root test?? and ?Saikkonen?Lütkepohl (2000a, b, c) cointegration test with structural shifts are implemented to examine the stationary properties of data and the presence of cointegration between variables, respectively. Moreover, the quantile regression is employed to assess whether the impact of oil price on real GDP differs across different states of the economy.
 Findings & Value added: Empirical results suggest the absence of long-run cointegrating relationships between oil price and GDP in all countries. The quantile regression reveals that oil price does not affect real GDP in the same way across countries and for different business cycle phases. More specifically, the symmetric quantile regression findings reveal that oil price exerts a positive impact on GDP in all countries and that the effect is higher during the recession than expansion states. The asymmetric quantile regression shows that GDP reacts to positive oil price changes in all countries. However, only the Emirati and Omani GDPs are affected by negative oil price changes.

Oil price fluctuations and economic growth: the case of MENA countries

PurposeThis paper aims to explore the extreme effect of crude oil price fluctuations and its volatility on the economic growth of Middle East and North Africa (MENA) countries. It also investigates the asymmetric and dynamic relationship between oil price and economic growth. Further, a separate analysis for each MENA oil-export and oil-import countries is conducted. Furthermore, it studies to what extent the quality of institutions will change the effect of oil price fluctuations on economic growth.Design/methodology/approachAs the effect of oil price fluctuations is not the same over different business cycles or oil price levels, the paper uses a panel quantile regression approach with other linear models such as fixed effects, random effects and panel generalized method of moments. The panel quantile methodology is an extension of traditional linear models and it has the advantage of exploring the relationship over the different quantiles of the whole distribution.FindingsThe paper can summarize results as following: changes in oil price and its volatility have an opposite effect for each oil-export and oil-import countries; for the former, changes in oil prices have a positive impact but the volatility a negative effect. While for the latter, changes in oil prices have a negative effect but volatility a positive effect. Further, the impact of oil price changes and their uncertainty are different across different quantiles. Furthermore, there is evidence about the asymmetric effect of the oil price changes on economic growth. Finally, accounting for institutional quality led to a reduction in the impact of oil price changes on economic growth.Originality/valueThe study concludes more detailed results on the impact of oil prices on gross domestic product growth. Thus, it can be used as a decision-support tool for policymakers.

Oil Price, Energy Consumption, and CO2 Emissions in Turkey. New Evidence from a Bootstrap ARDL Test

The main objective of this research was to test the effect of oil prices, renewable and non-renewable energy consumption, and economic growth on Turkey’s carbon emissions by using three co-integration tests, namely, the newly-developed bootstrap autoregressive distributed lag (ARDL) testing technique as proposed by (McNown et al., 2018); the new approach involving the Bayer–Hanck (2013) combined co-integration test; and the H-J (2008) co-integration technique, which induces two dates of structural breaks. The autoregressive distributed lag model (ARDL), dynamic ordinary least squares (DOLS), canonical cointegrating regression (CCR), and fully modified ordinary least square (FMOLS) approaches were utilized to test the long-run interaction between the examined variables. The Granger causality (GC) analysis was utilized to investigate the direction of causality among the variables. The long-run coefficients of ARDL, DOLS, CCR, and FMOLS showed that the oil prices had a negative influence on CO2 emissions in Turkey in the long run. Furthermore, the findings demonstrate that non-renewable energy, which includes oil, natural gas, and coal, increased CO2 emissions. In contrast, renewable energy can decrease the environmental pollution. These empirical findings can be attributed to the fact that Turkey is heavily dependent on imported oil; more than 50% of the energy requirement has been supplied by imports. Hence, oil price fluctuations have severe effects on the economic performance in Turkey, which in turn affects energy consumption and the level of carbon emissions. The study suggests that the rate of imported oil in Turkey must be decreased by finding more renewable energy sources for the energy supply formula to avoid any undesirable effects of oil price fluctuations on the CO2 emissions, and also to achieve sustainable development.

DO OIL PRICE FLUCTUATIONS AFFECT THE INFLATION RATE IN INDONESIA ASYMMETRICALLY?

Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer.