Oil Price Fluctuations Research Articles

Dynamic analysis of the relationship between exchange rates and oil prices: a comparison between oil exporting and oil importing countries

Addressing the interconnectedness of oil prices and foreign exchange rates poses a substantial challenge and raises significant questions within economic research. Existing studies reveal a fragmented understanding of the dynamics between these crucial variables, highlighting a need for deeper investigation. This study extends previous research by employing the time-varying parameter VAR extended joint connectedness model and using the baseline approach called the generalized connectedness approach. Our research findings indicate that exchange rates and crude oil prices exhibit pairwise and total connectedness, varying over time. Furthermore, this connectedness experiences substantial increases during severe crisis periods. We uncover that exchange rates and crude oil prices not only share a dynamic, pairwise, and total connectedness but these results are stronger for oil exporting countries. However, these methods yield inconsistent results for various countries. Moreover, there is compelling evidence that fluctuations in exchange rates and oil prices can cause bi-directional and time-dependent shocks.

Sensitivity to changes in oil prices, tax returns and the cross-section of stock returns: The present situation for net-oil exporting economies

This study investigates the sensitivity of stock returns to changes in oil prices and tax returns in net-oil exporting economies, focusing on the Gulf Cooperation Council (GCC) countries from March 30, 2003 to March 30, 2022. The problem statement addresses the challenge of understanding the interplay between oil price fluctuations, tax policies, and stock market dynamics in these economies, which are heavily reliant on oil revenues. The aim of the study is to provide insights into how variations in oil prices and tax returns impact the cross-section of stock returns in the GCC region. The objectives include analyzing the econometric relationships between oil prices, tax policies, and stock market performance using an appropriate econometric model. The results reveal a significant sensitivity of stock returns to changes in oil prices and tax returns in the GCC countries during the specified period. The econometric model employed indicates strong correlations between fluctuations in oil prices, tax policies, and stock market movements, highlighting the intricate connections between these variables. Moreover, the study identifies specific sectors within the stock market that are particularly sensitive to oil price changes and tax policy adjustments. Policymakers in the GCC countries can use these insights to design more effective fiscal and economic policies aimed at enhancing market stability and investor confidence amidst dynamic oil market conditions.

Oil Price Fluctuations and Ination Rate in Nigeria

Oil Price Fluctuations and Ination Rate in Nigeria

How do households cope during aggregate shocks? Evidence from the 2009–2015 oil crisis in Nigeria

The effect of global oil price fluctuations on households' costs of living in Nigeria is examined. We extend the Aggregate Demand/Supply (AD/AS) model by incorporating aggregate shock and idiosyncratic risk with cross-sectional heterogeneity in households' distributions and consumption substitution dynamics. Results from our model show that while positive oil prices reflect higher output, whether growth results from inflation or income-level growth remains unclear ―demand-side inflation will raise price levels, amplify budget constraints and ultimately lower welfare. For the empirical analysis, we use oil prices between 2009 and 2015 and micro-level data from the Nigerian General Household Survey (GHS) collected between 2010 and 2016 in Nigeria. In support, we show that increasing oil prices leads to greater consumption. However, the effect varies heterogeneously ―reflecting households' location and consumption substitution dynamics, adjustments in household size, and labor supply are some coping responses to oil price changes.

Menganalisis Potret Industri Indonesia Berdasarkan Industri Pengolahan Migas dan Non-Migas

This research aims to analyze industrial conditions in Indonesia with a focus on the oil and gas processing industry (oil and gas) and non-oil and gas industries. This study uses a descriptive approach by collecting secondary data from various official sources such as the Central Statistics Agency (BPS), the Ministry of Industry, and the annual reports of related companies. The analysis results show that the oil and gas and non-oil and gas processing industries have a significant contribution to the Indonesian economy, but face different challenges. The oil and gas industry, although it plays a large role in state revenues and exports, experiences fluctuations in world oil prices which affect its stability. On the other hand, the non-oil and gas industry shows more stable and diversified growth, with sectors such as manufacturing, textiles and electronics being the main pillars. This research also identifies various factors that influence the development of these two types of industry, including government policy, foreign investment, and infrastructure. It is hoped that these findings can provide insight for policy makers and stakeholders in formulating strategies to advance industry in Indonesia.

Oil and Stock Markets in Ongoing Flux: Impact of Current Events on Oil Price and Stock Market Performance

Abstract The price of oil and, indirectly, the performance of stock indices have been significantly affected by the events of recent years, with a negative impact on the global economy, including the evolution of the energy market in the context of the transition to renewable energy sources and changes in global energy policy. This paper proposes a comprehensive analysis of the evolution of stock indices, oil market volatility and investors' response to the "black swan" events that have recently caused changes in the global economy. Using advanced econometric and statistical models, the paper presents the complex relationship between the analyzed stock indices, the trends and changes that occurred within them and the relevant influencing factors, such as the price of Brent Oil and the Baltic Dry Index. The results obtained, based on univariate GARCH models (GJR-GARCH) and multivariate DCC-GARCH models are in accordance with specialized studies in the field and show that oil price fluctuations were higher at the beginning of the Covid-19 pandemic compared to the period after the military conflicts (stage in which no significant influence of the oil price on the stock market is observed). Also, using the Chow test, in the analyzed period there are 3 important breaking points that coincide with the dates when the COVID-19 pandemic began, the military conflict between Russia and Ukraine as well as the military conflict between Israel and Gaza, events with a strong impact on the economy. The obtained results also show another important aspect, namely that, during the selected period January 2019-November 2023, the price of oil and the stock market were much more affected by the COVID-19 pandemic than by military conflicts, which cannot be also stated in the case of the price of the Baltic-Dry Index.

Re-validating the Phillips Curve hypothesis in Africa and the role of oil prices: A mixed-frequency approach

This paper investigates the relationship between unemployment and inflation in 29 African economies by re-examining the Phillips Curve hypothesis and evaluating the role of global oil prices in predicting inflation. Existing studies often use uniform-frequency variables, which can lead to biased results by omitting information from high-frequency series. We employ a mixed data sampling regression model to analyze inflation in selected African countries by regressing monthly inflation rates on annual unemployment rates and daily oil price returns. Our findings show that the Phillips Curve hypothesis holds in a few countries across Central Africa (Cameroon, the Central African Republic, Chad, and Republic of the Congo), East Africa (Rwanda), North Africa (Algeria), Southern Africa (Botswana and Malawi), and West Africa (Burkina Faso and Mauritania). In the other countries, the hypothesis does not hold, potentially indicating a predominance of cost-push inflation. Our analysis demonstrates that global oil prices impact inflation differently across these countries. Additionally, daily oil price data significantly enhance inflation forecasting compared to monthly data. Incorporating additional economic variables, such as exchange rates and interest rates, further improves forecast accuracy. We recommend targeted monetary policies to mitigate the impacts of oil price fluctuations and unemployment on inflation.

Energy use, energy access, and oil price fluctuations as new determinants of environmental quality in APEC countries

Energy security has moved to the forefront of international policy agendas and boosted efforts to deploy clean energy technologies. In the past few years, clean energy investment has accelerated at a faster rate than investment in fossil fuels, contributing to the emergence of peak oil demand. This study examines the impact of energy use, energy access, and oil price fluctuations on environmental quality in APEC countries between 1991 and 2020 using shadow economies and agricultural lands as moderating variables. The results of the Arellano-bond dynamic panel data estimation show that energy use, energy access, agricultural land, and a shady economy are positively related to CO2 emissions, while oil price fluctuations are negatively associated with CO2 emissions in APEC nations. There is a positive correlation between energy use and carbon dioxide emissions among APEC nations. As energy use increases, CO2 emissions increase as well. APEC nations have a positive relationship between energy access and carbon dioxide emissions. Policymakers in APEC countries must understand the implications of rising energy consumption and CO2 emissions. To mitigate negative environmental consequences, develop sustainable energy sources, and promote economic growth, energy efficiency measures can help to minimize energy consumption and reduce CO2 emissions. APEC countries are encouraged to develop carbon pricing mechanisms to encourage companies to reduce greenhouse gas emissions through cap and trade systems or carbon taxes. The implementation of carbon pricing mechanisms encourages businesses to switch to cleaner, renewable energy sources as a result of putting a price on carbon emissions.

The asymmetric effect of G7 stock market volatility on predicting oil price volatility: Evidence from quantile autoregression model

This paper investigates the asymmetric effect of G7 stock market volatility on predicting oil price volatility under different oil market conditions by using the quantile autoregression model. Both in- and out-of-sample results demonstrate the prediction superiority and effectiveness of the quantile autoregression model. The US and Canada's stock markets exhibit the strongest predictive ability across the entire distribution, while the UK demonstrates strong predictive power specifically during periods of high oil price volatility. Japan, Germany, France, and Italy as oil importers can predict low and median oil volatility. The strong predictability of G7 stock volatility may be attributable to their significant impact on the business cycle and investor sentiment. This asymmetric prediction ability arises not only from the average volatility shocks at various quantiles but also from the bad and good stock volatility at different quantiles. Further research suggests that bad stock volatility appears to be more predictable than good stock volatility, especially in high oil price fluctuations. Furthermore, the superiority and effectiveness of the quantile autoregression model in predicting oil volatility are proven to be applicable to emerging markets. This study may provide useful insights for policymakers, businesses, and investors to improve crude oil risk prediction and risk management under different market conditions.

Oil price volatility and changes in corporate debt: An empirical study in the Indian landscape

Changes in crude oil prices affect corporate debt position. This study investigates the association between changes in debt and crude oil price volatility in nonfinancial, BG, and SA firms in India. We use financial variables, crude oil prices, and macroeconomics data from 2004 to 2020 for 16,452 firm-years and this study employs unbalanced panel data and utilizes different empirical methodologies, including the generalised method of moments (GMM) estimator, to test the stated hypotheses. The results reveal that the debt position and the crude oil price volatility significantly have different effects on business group (BG) and stand-alone (SA) firms. Crude oil price volatility is positively related to changes in the debt position. The effects of the financial variables also significantly differ for the BG and SA firms. Finally, firms change their debt position in the positive or negative direction based on the fluctuations in crude oil prices. Policy implications have also been provided.

Seeing is believing: Forecasting crude oil price trend from the perspective of images

AbstractIn this paper, we propose a novel imaging method to forecast the daily price data of West Texas Intermediate (WTI) crude oil futures. We use convolutional neural networks (CNNs) for future price trend prediction and obtain higher prediction accuracy than other benchmark forecasting methods. The results show that images can contain more nonlinear information, which is beneficial for energy price forecasting. Nonlinear factors also have a strong influence during drastic fluctuations in crude oil prices. In the robustness tests, we find that the image‐based CNN is the most stable approach and can be applied in various futures forecasting scenarios. In the prediction of low‐frequency models for high‐frequency data, the CNN method still retains considerable predictive power, indicating the possibility of transfer learning of our novel approach. By unleashing the power of the picture, we open up a whole new perspective for forecasting future energy trends.

The effect of oil price on stock market performance and petrochemical stock value using NARDL

The aim of the study is to examine the impact of oil prices on the stock market performance and the stock value of petrochemical companies on the Tehran Stock Exchange (TSE). For this, it utilizes the Non-linear autoregressive distributed lag during 2011 to 2021 using time series data with monthly frequency. The results showed that in the short run, the oil price has an asymmetric impact on the stock value of petrochemical industries and also on the performance of the stock market, while in the long run, this effect is symmetrical. So, the influence of bouncing up the oil price is greater than the impact of its moving down. Then, the asymmetric effect happens through the increase in oil prices. Therefore, ups and downs in oil prices lead to fluctuations in the stock market returns, especially in petrochemical companies. Based on the results, capital market participants should watch the informational content of oil price fluctuations to make buying and selling decisions and invest in companies' shares according to these fluctuations.

How do oil prices affect the GDP and its components? New evidence from a time-varying threshold model

Revealing the precise thresholds at which fluctuations in oil prices start to affect gross domestic product and its various components (consumption, investment, expenditure and exports) holds significant implications for policymakers in both oil-importing and oil-exporting countries. Existing studies assessing the effects of oil prices on economic activity typically assume constant or stable threshold values. However, recent evidence suggests that this restrictive assumption may not accurately capture the dynamic nature of these relationships. We address this issue by adopting a more realistic framework that allows for the possibility that oil prices will have a time-varying effect on economic activity. We also employ the innovative time-varying threshold regression kink model of Yang and Su (2018). Our analysis focuses on a sample of 20 top oil-importing and oil-exporting countries during the period 1995Q1 to 2023Q2. The findings of our investigation provide compelling evidence to support the existence of time-varying threshold levels in the relationship between oil prices and macroeconomic activity for most countries in our sample. Notably, our research unveils a substantial heterogeneity in the oil price thresholds across the investigated countries, thereby challenging the notion of a universal threshold applicable to all.

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.

The Volatility Spillover of Global Oil Price Uncertainty

This manuscript, for the first time, analyses the volatility spillover of oil price uncertainty in the world using data from oil price uncertainty recently developed by Abdul and Qureshi (2023), spanning the time 1996-2019 on a monthly frequency. ARCH/GARCH (Autoregressive Conditional Heteroskedasticity and Generalized Autoregressive Conditional Heteroskedasticity) models are employed as an econometric tool. The findings suggest that ARCH model is more consistent than GARCH model in assessing the volatility of oil price uncertainty in the world. The results show that the volatility of oil price uncertainty is high in the world. The transition to renewable energy sources is proposed as a way to resist unexpected oil shocks since the production of renewables does not depend on the fluctuations of oil prices. Consequently, uncertainties in the oil price do not hinder economic activities.

Reinvestigating the Oil Dependency of the GCC Countries’ Stock Market: A Regime-Switching Cointegration Approach

This paper investigates the asymmetric impact of oil prices on Gulf Cooperation Council (GCC) stock markets using a regime-switching cointegration approach with data from April 2012 to April 2022. we postulate that investors consider ups and downs in the stock market index instead of price-earnings ratios in their decision-making process. Our results indicate that investors exhibit more optimism during economic upturns, corresponding to positive oil shocks, than pessimism during economic downturns. The study offers several contributions to the literature: (i) Diagnostic tests affirm that constructing the model based on stock market index movements rather than P/E ratios results in superior performance. (ii) As expected for oil-dependent nations, our model attributes more significant deterministic influence to the oil market and closely tracks the stock market. (iii) The results demonstrate that positive oil shocks exert a more pronounced long-term asymmetric influence on GCC stock markets than adverse shocks. (iv) Dynamic multiplier analysis reveals that oil shocks persist longer in Oman, Bahrain, and Qatar's markets than in the UAE, Saudi Arabia, and Kuwait. (v) The stock market in the United Arab Emirates exhibits greater independence from oil price fluctuations, responding modestly, while Qatar and Bahrain markets are more sensitive.

Oil Price Fluctuation and their Impact on the Macroeconomic Variables: The Case of Kuwait

The fluctuations in the international prices of crude oil have been a major concern for many economies who depend mainly on oil exports. Oil price shocks are a major disturbance for the economies of oil producing countries. This study investigates the impact of oil price shocks on selected macroeconomic variables in Kuwait using secondary data covering the period of 2001 to 2022. The study adopted the Vector autoregression (VAR) method to analyze the response of Kuwait macroeconomic variables to shocks in oil prices. Oil price in the study is considered in 2 categories: the linear oil price and the non-linear oil price (positive and negative changes in oil price). Based on the findings, it is observed that oil price shocks significantly impact macroeconomic variables in Kuwait. It is found that positive changes in oil prices have a more positive and significant impact on the macroeconomic variables compared to the negative changes in oil price. It is however concluded that there is a need for more policy developments to better harness periods of positive oil price experiences, and develop hedging risk framework for periods of negative changes in oil price in order to curb the impact of oil price shocks on Kuwait’s macroeconomy.

Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR

This paper aims to examine the dynamic pass-through effect of oil price shocks on inflation in OAPEC countries using quarterly data ranging from 1990:Q1 to 2022:Q4. The incorporation of the TVP-VAR model along with the Markov Chain Monte Carlo method with stochastic volatility estimation offers a robust framework for capturing the time-varying nature of the relationship. Additionally, the analysis of the Impulse Response Function provides valuable insights into the short-term and long-term dynamics following oil price shocks. The results demonstrate a significant positive pass-through effect of oil prices on inflation in the sample member states, with heterogeneous magnitude and persistence. These variations are attributed to diversity in oil dependency, exchange rate regimes, monetary policy frameworks and the degree of openness to global markets. The study suggests the need for effective inflation management strategies and appropriate policy responses to oil price fluctuations. Furthermore, policymakers may consider adjusting exchange rates, interest rates, or trade policies to manage inflationary pressures effectively.

Circular behavior of oil consumption and the impact of oil prices with the Fourier approach

In the changing world, oil continues to be important in energy production. Using monthly data from 1965 to 2022, the permanency of oil consumption fluctuations was investigated. Fourier-based Granger causality tests were used to examine cause-and-effect relationships between variables. Long-term relationships were estimated using Fourier-based Engle Granger cointegration tests. Unlike previous research, this study considers the long and short-term effects of countries that consume the most and least oil, as well as on a global scale, from different perspectives, examining oil price fluctuations together, and estimating these analyzes using the Fourier approach. Oil consumption fluctuations appear temporary in New Zealand and Luxembourg but permanent in all other countries. Oil consumption and prices share a causal relationship in the US, Japan, New Zealand, and Luxembourg, but no relationship elsewhere. A long-term relationship exists between oil consumption and prices in the US, India, Saudi Arabia, Russia, Japan, South Korea, Canada, Mexico, and Estonia. In other countries, no long-term relationship is found between these two variables. Error correction model estimation shows only the equation for Japan can be interpreted based on statistical significance. A one-unit deviation between oil consumption and prices can reach equilibrium in 20 months.

The Impact of Russia-Ukraine War on Bangladesh’s Economy: A Supply Chain Perspective and Way Forward

Bangladesh’s economy is facing significant challenges restricting from the Russia-Ukraine conflict, intensified by its status as an oil-importing nation vulnerable to global oil price fluctuations. This study addresses the current perspectives and challenges which include inflationary pressures, trade imbalances, and disruptions in the supply chain, leading to increased expenditures for essential commodities. This research was developed through a systematic literature review based on secondary data, including online databases, journals, and review papers, etc. This exploratory study reveals that policymakers need to diversify energy sources, forge new trade partnerships, and implement measures to bolster economic resilience. The economic fallout from the conflict, surpassing the actual war in cost, has depleted the central bank's reserves, prompting austerity measures. The forex market experiences volatility, contributing to high trade deficits and the highest inflation rate in recent years. Bangladesh must address forex management challenges and formulate prudent policies for economic recovery. The conflict has disrupted global commodity markets, leading to inflationary pressures and increased costs for businesses in Bangladesh, especially larger organizations handling rising raw material costs and weak consumer demand. The rationale of this paper is to evaluate the literature on this aspect and apprehend the global demand, and supply of food and commodities, economic impacts in Bangladesh, challenges in global trade, trade relations, currency fluctuations, inflation, emergency price, and its consequences, recognize gaps and advocate future research itineraries. The paper offers a synopsis and appraisal of the overall economy of Bangladesh and finally navigates a way forward to the policymakers which would unlock further research to develop this sector.