Major Oil-exporting Countries Research Articles

Impact of economic growth and financial development on renewable energy use in selected oil-exporting countries

The aim of this study is to explore the influence of economic growth and financial development on renewable energy consumption. For the purpose of analysis, this investigation uses annual data on renewable energy consumption, economic growth, financial development, consumer price index, domestic investment, and foreign direct investment for 13 major oil-exporting countries, including Algeria, Guinea, Gabon, Iran, Libya, Nigeria, Congo, Republic of Venezuela, Saudi Arabia, Mexico, Malaysia, Sudan, and Russia, during the period 1990-2020. The study employs the Pooled Mean Group (PMG) method and Dumitrescu-Hurlin panel causality test to conduct the empirical analysis. The Hausman test determines the PMG estimator as the most suitable among the Mean Group (MG), Dynamic Fixed Effect (DFE), and PMG estimators. This research shows that economic growth and financial development have a positive and significant long-term impact on renewable energy consumption. This suggests that as the economy grows and financial systems develop, there is a potential for an increase in the use of renewable energy. The Dumitrescu-Hurlin causality test and the panel dynamic ordinary least squares (DOLS) method support these findings. From a policy standpoint, promoting economic growth and financial development could lead to greater use of renewable energy and contribute to sustainable development in oil-exporting countries.

From black gold to financial fallout: Analyzing extreme risk spillovers in oil-exporting nations

Considering various critical periods including the COVID-19 pandemic and the ongoing Russian–Ukraine war, this paper investigates the dynamics of extreme spillover effects from the crude oil market to the financial markets of major oil-exporting countries. With the increased integration of global financial systems, oil market fluctuations can have far-reaching implications for economies that are heavily reliant on oil exports. We employ a wavelet approach to explore the co-movement and lead–lag relationships between the oil market and the financial markets of the considered countries. Next, we follow the newly introduced frequency-based connectedness approach of Hanif et al. (2023) to explore the dynamic connectedness and risk transmission among these markets. First, results from the wavelet coherency technique show that the degree of co-movement during the Russia–Ukraine war was significantly lower than it was under both the pre-crises and COVID-19 pandemic periods as shown by fewer regions with warmer colors (red), which show significant dependence at the 5% level, especially for Canada. Secondly, the dynamic connectedness of these markets was largely driven by long-term dynamics during the Russia–Ukraine crisis period, unlike the short-term driven connectedness observed during the COVID-19 pandemic. The average degree of connectedness at high frequencies (short-term) forms a smaller proportion of the average level of connectedness at low frequencies (long-term), indicating a stronger long-term influence of the crisis on the interconnectedness of these markets. Additionally, we find that Canada and the United States were the major net transmitters of shocks to the network during the conflict period, while Iraq exhibited the strongest level of idiosyncratic shocks. Interestingly, the crude oil market was observed to send stronger shocks to the network at the onset of the war, with the impact gradually diminishing as the conflict progressed. Our study provides valuable insights for policymakers and investors as a guide towards more informed decision-making and appropriate risk management strategies in the face of oil price volatility in these regions.

Mitigating emissions in major oil-exporting countries: accounting for the role of natural resources rents, institutional quality, and business environment

ABSTRACTThe present research investigates the linkage between natural resources rent and environmental quality taking into the role of the institutional and business environments. It uses a sample of 15 major oil-exporting countries throughout 2008–2020 and performs the Systems Generalized Method of Moment (SGMM) as an empirical approach. Findings confirm that natural resource rent deteriorates the environmental quality since its coefficient is found to be positively and significantly linked to the dependent variable (CO2 emissions). After dividing the sample into MENA oil-exporting countries and Non-MENA exporting countries, different results were found between these two blocs of countries. Additionally, institutional quality and the environment business are found to play an important role in mitigating the negative impact of natural resources rent on environmental quality. Many lessons could be drawn from this research and many interesting policy implications were drawn from the findings. Policymakers of these countries should work on preserving and protecting the quality of their environment. Policymakers in these countries, notably MENA oil-exporting countries, are invited to invest in clean energy. Additionally, an improvement of the institutional quality and the environment business is needed since they mitigate the negative impact of natural resources rent.

Spillover effects of urbanization on carbon emissions: A global view from 2000 to 2019

An evident increase in carbon emissions (CEs) mainly caused by urbanization has aroused extensive concern. Insufficient research exists on the global impact of urbanization on CEs and their spillover effects. This study addresses this gap by investigating the spillover effects of urbanization on CEs. It employs bivariate spatial autocorrelation analysis and spatial econometric models to analyze data for 125 countries from 2000 to 2019. The results showed that developed and major oil-exporting countries had higher per capita CEs than other countries; however, with a downward trend. The bivariate Moran's I index between urbanization level and per capita CEs reached a maximum of 0.403 in 2008 and then continuously decreased to 0.343 in 2019, to a certain extent, which indicates that the promoting effect of urbanization on CEs was weakening. The results of spatial econometric models presented an inverted U-shaped curve between global urbanization and per capita CEs, with a threshold of 68%. Furthermore, the findings revealed that an increase in proportion of added value of secondary and tertiary industries to gross domestic product (GDP), as well as an increase in per capita GDP, tended to be associated with higher per capita CEs. Conversely, an increase in population density may produce a decline in per capita CEs. Our study highlights the global impact of urbanization on CEs and underscores the importance of developing policies for sustainable urbanization and carbon emission reduction globally.

The effect of oil implied volatility and geopolitical risk on GCC stock sectors under various market conditions

The importance of crude oil volatility and geopolitical risk for stock pricing is well known in both developed and emerging economies, but is relatively understudied in major oil-exporting countries at the sectoral level of stock indices and under various market conditions. Using daily data on eight Gulf Cooperation Council (GCC) stock sector indices over the period February 2010–30 June 2022, we capture the effect of two global risk factors, namely oil implied volatility and geopolitical risk, on stock returns and volatility while accounting for bull/bear markets and low/high volatility regimes. The analysis indicates the following results. Firstly, the effect of oil implied volatility is stronger than that of geopolitical risk, notably for Consumer Discretionary and Staples. Secondly, the effect on both returns and volatility is generally positive during bull markets, but it is stronger for volatility; the response of the returns of Energy, Materials, Industrials, and Financials is negative in bear markets and positive during bull markets. Thirdly, the effect of oil implied volatility on stock sector volatility is slightly higher during the COVID-19 outbreak for some cases and is prominent during bull markets. Our findings matter for the predictability of GCC stock sector returns and volatility and for the design of hedging strategies under various market states.

The influence of COVID-19 on the transition to a more circular economy in oil-exporting countries

The present study has attempted to systematically explore the impact of the COVID-19 pandemic on transitioning to a more circular economy in 15 major oil-exporting countries. These countries are being explored because they deliver the highest environmental impact. Apart from the comprehensive literature review, the authors interviewed the group of 32 individuals having sufficient knowledge on the subject. The respondents provided their opinions on the main challenges that impacted the move to a more circular economy in oil-exporting countries during the COVID-19 pandemic, addressed the reasons for these challenges and suggested ways to respond to them. The consensus among the respondents was that the pandemic has slowed the transition process down and there is an urgent need to resume it. Their opinions on other topics were different, but not contradicting. Also, in addition to the frequently discussed topics, the respondents addressed those usually insufficiently considered, namely the pursuit of a luxurious lifestyle and scepticism towards relevant concepts and policies in many countries under consideration. The paper finishes with a set of recommendations aimed at early resumption and intensification of efforts on transitioning to a more circular economy in oilexporting countries.

Landscape Discussion of Oil Rents and Primary Government Expenditure Budget

Purpose: This study compares Malaysia’s oil rent dynamics and primary government approved budget (PGEB) with other major oil-exporting countries. This study reviews the annual time series data from 2005 to 2020 of oil rents and PGEB. Methodology: The outcomes derived from meta-analysis approach are presented in graphical comparisons of oil rents and PGEB of Malaysia with other oil exporters. A horizontal comparison was also carried out. Kuwait, Saudi Arabia, Nigeria, Kazakhstan, Brazil, and the Russian Federation were selected as relevant oil exporters. Findings: Referring to the historical graphical presentation, the oil market fluctuations were linearly aligned to the budget figure among oil exporters. The study results portray historical connections between oil rents and PGEB in the context of Malaysia and other oil exporters, which may be beneficial to policymakers and practitioners in their decision-making process. Practical Implications: The findings that display the historical connections of Malaysian oil rents and PGEB with other oil exporters serve as a guideline to policymakers and practitioners. Originality/Value: In addition to the Malaysian setting, the scenario of other oil exporters amplifies the dynamics of oil rents on PGEB formulation. Keywords: Oil rents, primary government, approved budget, crude oil, Malaysian economy.

Causality between oil prices and exchange rates: a quantile-on-quantile analysis

This study examines the causal link between the crude oil price and the exchange rate in five major oil-exporting countries (Saudi Arabia, Russia, Canada, the United Arab Emirates and the United States) that have recently adopted different exchange rate policies. Using a nonlinear causality approach, quantile-on-quantile, with monthly data from April 1996 to January 2020, we find causal relationships between crude oil prices and exchange rates across quantiles in all of the countries studied. A plausible explanation for such findings is that these countries are oil exporters who depend largely on the proceeds of the oil trade. Any shocks in the oil market that affect oil production and price translate t exchange rate fluctuations in these countries. Meanwhile, the effect of the oil price on the exchange rate is diverse and heterogeneous depending on the country's level of crude oil production and consumption, its exchange rate policies and the strength of its economy.

Unveiling the Time-dependent Dynamics between Oil Prices and Exchange Rates: A Wavelet-based Panel Analysis

The objective of this paper is to re-examine the relationship between real oil prices and real effective exchange rates (REER) for major oil-exporting countries with floating exchange rates. We apply the wavelet-based principles of Gallegati et al. (2016) using monthly data for the period 1996 to 2015. In contrast to many previous studies, our results support the theoretically expected positive nexus between the real oil prices and REER for our dataset. This (theoretically-expected) positive relationship is stronger at the larger time scales (that is, at the 4-8 and 8-16 month wavelet scales) compared to the smaller time scales (that is, at the 1-2 and 2-4 month wavelet scales). The findings of this study therefore add to the existing literature, since they disentangle the specific relationship between oil prices and exchange rates at different time scales, which has important policy implications.

Asymmetric impact of exchange rate pass-through into employees' wages in sub-Saharan Africa: panel non-linear threshold estimation

PurposeThe purpose of this article is to investigate the asymmetric impact of exchange rate pass-through (ERPT) on employees' wages via consumer prices in 15 major oil-exporting countries from sub-Saharan Africa over the period 1996-2017 using the panel threshold regression model.Design/methodology/approachThe methodology used in this article was built on non-linear panel threshold regression models developed by Hansen (1996, 1999) threshold regression. The authors first tested for the existence of threshold-effect in ERPT and wage nexus using 1,000 bootstrap replications and 400 grid searches to obtain an optimal threshold. We also estimated that asymmetric ERPT on employees' wages reacts differently when the inflation-threshold exceeds beyond a 15.12% threshold level.FindingsOur findings showed that asymmetric ERPT is incomplete and indicates that an increase by one standard deviation in real exchange rate causes a decline in employees' wages by 2.69%.Research limitations/implicationsThe policy implications of our results are drawn from the significant threshold estimates. However, a significant threshold value of 15.12 is an inflation-threshold estimates that split our 330 observations into the lower (upper) regimes. Further, an inflation rate beyond the threshold value is likely to have an asymmetric ERPT on employees' wages in the 15 major oil-exporting sub-Saharan African (SSA) countries.Practical implicationsThe practical implication of the study is when ERPT exceeds the threshold, the effect of real exchange rate variations is passed on to employees' wages. It is widely believed that labor productivity increase with increased minimum wages. Nevertheless, there is contention as regards the effects on employment and poverty. As rising goods prices make the minimum wage increased homogeneous of degree zero.Social implicationsConsiderable increased ERPT on imported goods reduces employees' wages purchasing ability from import-dependent countries through import prices. Once it has documented, this also reduces welfare via deteriorations of marginal propensity to consume (MPC) and marginal propensity to savings (MPS).Originality/valueThis article integrates labor purchasing power into the analysis of ERPT using non-linear dynamic panel heterogeneous threshold regression. It extends the Hansen (1996, 1999) dynamic panel threshold models to exchange rate pass-through in SSA economies.

The Effect of Jumps in the Crude Oil Market on the Sovereign Risks of Major Oil Exporters

We study the jump behaviour in the sovereign risks of major oil-exporting countries and examine whether it is affected by jumps in the price and volatility of crude oil. Data used are daily from 14 February 2011, to 31 July 2019. We detect the presence of jumps in many oil exporters and find evidence of less frequent jumps in the crude oil market. The jumps in sovereign risks of oil-exporters are significantly affected by oil volatility jumps, not by oil price jumps. These findings suggest that the sovereign risks of oil-exporters are affected by abrupt movements in oil implied volatility, which points to a contagion effect. The findings are useful not only for refining the prediction of the sovereign risks of oil-exporters but also in reducing the potential effect of price discontinuity of sovereign risks on public finances sustainability and financial health.

Complex network approach for the structural optimization of global crude oil trade system

Abstract It is essential to reveal the optimal structure of global crude oil supply and demand, which has become one of the most important factors affecting every country’s energy strategy and economic development. However, the existing crude oil supply and demand structure does not function well. This paper proposes a distributed bipartite network to model crude oil trade. The optimal network structure, which has the minimal total trade cost is obtained by Simulated Annealing Algorithm. The presented optimization model encompasses the framework of complex network theory and crude oil trading issues, providing a good solution for the crude oil trade system. Comparing with the pre-optimized trading network, the proposed model can effectively reduce trade cost. The Robustness Indicator is proposed to reveal that the major oil-exporting countries choose their partners more wisely and the trade relations are steadier. In the optimal distributed network, both the major oil-exporting countries and major oil-importing countries play important roles in distributing crude oil among the trading countries. Overall, the proposed model offers fresh insights for structural reconstruction of crude oil supply and demand network centered on the efficient usage of crude oil and keeping the international oil trade running smoothly.

Crude Oil Price and Exchange Rates - The Case of Malaysia and Brunei

This study is driven by the motivation to investigate the impacts crude oil price fluctuations on Malaysian and Brunei exchange rates as proxied by RM/USD and BD/USD respectively. Even though there is no specific economic theories that can help explain the interaction between commodity and foreign exchange markets, the study is research-worthy as both Malaysia and Brunei are major oil-exporting countries in South East Asia. This study is considered quite extensive involving 370 data points spanning from January 1988 till October 2018. Using Engle-Granger 2-Step Cointegration Test (1987) as an estimation tool, the empirical results show the presence of long-term equilibrium relationship between the two national currencies and crude oil price. Interestingly, there is also a significant short-run causality between them in both countries. With respect to the short-run dynamics, there is a unidirectional causality running from crude oil price to the two exchange rates. The study also posits that RM is less prone to changes in crude oil price during the period before Asian Debt Crisis in 1997. After the removal of RM peg in June 2005, RM is found to be more sensitive towards changes in crude oil price over short haul. In summary, the significant equilibrium and dynamic relationships between the national currencies and crude oil price are therefore confirmed and perhaps the quotation of crude oil price in USD could be one of the explanations.

Exchange rates of oil exporting countries and global oil price shocks: a nonlinear smooth-transition approach

ABSTRACTThis paper models logistic and exponential smooth transition adjustments of real exchange rates for six major oil-exporting countries in response to different shocks affecting oil prices. The logistic form captures asymmetric and the exponential form symmetric adjustments in regards to positive and negative oil price shocks. We chose oil-exporting countries that do not peg their exchange rates. For most countries, we detect no statistically significant non-linearities for the adjustment process of real exchange rate returns, be they asymmetric or symmetric, in response to oil supply shocks, idiosyncratic oil-market-specific shocks, and speculative oil-market shocks. Exceptions are oil supply shocks in the UK and possibly Brazil, where exchange rates respond nonlinearly, though the effects are symmetric for both countries. On the other hand, global aggregate demand shocks, which are shocks not originating directly in the oil market, have nonlinear asymmetric effects on real exchange rate returns for Canada, Mexico, Norway and Russia, and nonlinear symmetric effects for Brazil and the UK.

The impact of oil-market shocks on stock returns in major oil-exporting countries

The impact that oil-market shocks have on stock prices in oil exporting countries has implications for both domestic and international investors. We derive the shocks driving oil prices from an oil market model that explicitly identifies speculative trading in the crude oil market. We study the nonlinear relationship of oil price shocks with stock market returns in major oil-exporting countries in a multi-factor Markov-switching framework. Flow oil-demand shocks have a statistically significant impact on stock returns in Canada, Norway, Russia, Kuwait, Saudi Arabia, and the UAE. Idiosyncratic oil-market shocks affect stock returns in Norway, Russia, Kuwait, Saudi Arabia and UAE. Speculative (oil-inventory) shocks impact stock returns in Canada, Russia, Kuwait and the UAE. Flow oil-supply shocks matter for the UK, Kuwait, and UAE. Mexico is the only country where stock returns are unaffected by oil-market shocks. A portfolio that uses the Markov-switching probabilities to switch between equities in the low volatility state and T-bills in the high volatility state outperforms a buy and hold strategy for some countries.

Investigating the twin-deficit phenomenon among oil-exporting countries: Does oil really matter?

This study empirically investigates the existence of twin deficits—the impact of fiscal policy on the current account—among selected major oil-exporting countries. Given the huge effects of the oil proceeds on these economies, the study separates the effects of oil on the fiscal balance from its effect on the current account balance. The investigation took a further step by grouping these countries—based on their fiscal policy actions over the period of years under review—into pro-cyclical and counter-cyclical fiscal countries. In line with the existing literature, the impact of fiscal balance on the current account balance takes into consideration the contemporaneous effects brought about by exchange rate fluctuations, the growth in GDP, rate of openness and the growth in money supply. The models are estimated based on a panel of 31 oil-exporting countries over the period 1984–2013, using the two-stage least squares estimation techniques. The results from all countries estimations reveal the existence of twin-deficit in the total economy. In the non-oil economy, on the other hand, the evidence of twin-deficit disappears. This evidence is also reported in the counter-cyclical fiscal countries. Results from pro-cyclical fiscal countries indicated the total opposite, revealing the existence of twin-deficit in the non-oil economy, while this evidence does not occur in the total economy. The indisputable conclusion is that oil dominance continues to blur the existence of twin deficits among the oil-exporting countries.

The Impact of Oil-Market Shocks on Stock Returns in Major Oil-Exporting Countries: A Markov Switching Approach

The impact that oil shocks have on stock prices in oil exporting countries has implications for both domestic and international investors. We derive the shocks driving oil prices from a fully-identified structural model of the oil market. We study their nonlinear relationship with stock market returns in major oil-exporting countries in a multi-factor Markov-switching framework. Flow oil-demand shocks have a statistically significant impact on stock returns in Canada, Norway, Russia, Kuwait, Saudi Arabia, and the UAE. Idiosyncratic oil-market shocks affect stock returns in Norway, Russia, Kuwait, Saudi Arabia and UAE. Speculative oil shocks impact stock returns in Canada, Russia, Kuwait and the UAE. Flow oil-supply shocks matter for the UK, Kuwait, and UAE. Mexico is the only country where stock returns are unaffected by oil shocks. These results shed important light on investor sentiment toward the relationship between oil shocks and stock markets in oil exporting countries.

Tail dependence between oil and stocks of major oil-exporting countries using the CoVaR approach

This paper investigates the negative tail risk dependence between oil shocks and stock indices (at aggregated and desegregated levels) for Saudi Arabia (KSA), United Arab Emirates (UAE) and Russia, over the period between 2007 and 2016. DCC-MGARCH approach and CoVaR measure are employed to assess the oil shock exposure. The results show that the tail dependence is significant and depends on the origin of the oil shocks, with intensity that varies across countries and sectors.

Reconsidering the scarcity factor in the dynamics of oil markets: An empirical investigation of the (mis)measurement of oil reserves

This paper sheds light on the importance of the (mis)measurement of oil reserves in the market dynamics. Using proven oil reserves from three different institutional data sources and for two groups of oil-exporting countries (OPEC members and OECD major oil-exporting countries), we demonstrate that estimates of oil reserves from different institutions are likely to be driven by some common factors for the OPEC panel, which is not the case for the non-OPEC panel. The implications of these results from panel cointegration analysis can be seen in two ways. First, any discussion of the sources of reserves data seems not to be relevant since OPEC has an influence on the measure of its reserves whatever the energy agency that assesses them. Second, the literature dealing with the oil curse and the associated policy responses should consider oil reserves as an endogenous variable for the resource abundance.

ПАРАДОКС “РЕСУРСНОГО ПРОКЛЯТИЯ”: МЕЖСТРАНОВЫЙ АНАЛИЗ

The problem of the influence of the resources on the economic growth is dualistic. On the one hand, the abundance of resources is a factor favoring socio-economic development of the countries and territories. On the other hand, there were preconditions for the occurrence and strengthening of the effect of the dependence on resources. The dependence on resources in its extreme form is expressed in the effect of the resource curse. The resource curse problem has been studied for more than two decades. During this time researchers have created a set of econometric models, with the help of which the effect of resources and other factors (primarily – institutes) on the economic growth has been evaluated. But most of these studies were carried out for the period of 1970–1980’s, when there was a slowdown in the economic growth in major oil-exporting countries. This fact was the basis for the extension of the resource curse thesis. Despite the apparent persuasiveness and conclusiveness, this thesis has been challenged by many researchers. The failure of the resource curse theory was even more obvious in the 1990’s and 2000’s. This explains the relevance of modern cross-country econometric studies which were carried out by the authors. It is also necessary to correct the views on the resource factor. It is important to distinguish between a resource availability factor and a factor of resource dependence, that do not always exist together and that have a different impact on economic growth. The article presents the results of the cross-country econometric studies of the effects of resource supply and resource dependency, coupled with the influence of institutional factors. Analysis was carried out about the likely consequences in terms of economic growth. And the situation taking place in Russian economy was estimated. The overall conclusion is that resources themselves cannot be a curse, and only the excessive resource dependence has a negative effect on the economy. Specific risks and increased uncertainty are essential in the development of a resource-based economy. These conclusions are relevant for many countries including Russia.