Net Oil-importing Countries 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.

Fueling the bottom line: Decoding the effects of oil on banking performance in net oil-importing economies

Banks play a pivotal role in the financial sector, assuming critical functions such as facilitating the monetary policy transmission mechanism and acting as intermediaries between savers and borrowers. Meanwhile, oil represents a fundamental input for economic activities, and its inherent volatility serves as a significant catalyst for economic instability. Given the critical roles of banking institutions and oil in the economy, their relationship garners attention from various stakeholders. The growing body of literature has examined the nexus between oil and banking performance. However, existing research has predominantly concentrated on either oil-exporting jurisdictions or country-specific analyses. Hence, the present study endeavors to bridge this gap in the literature by investigating the intricate dynamics between oil and banking performance, specifically in net oil-importing countries. The dynamic panel method is employed. The findings indicate that oil has direct and indirect effects on the profitability of banks operating through transmission channels.

The Terms of Trade Effect on Agriculture Export the Case of Indonesia as a Net Oil Importer Country

This study investigates the effects of changes in terms of trade (t.o.t) on economic indicators in net oil-importing countries. Findings demonstrate that improving trade conditions lead to increased profitability, investment opportunities, and capital accumulation, although the pace of accumulation slows down after an initial period of rapid growth. The study also highlights the positive impact of trade terms on foreign debt in developing economies, as enhanced terms of trade contribute to higher export revenues and better capacity to service debt obligations. The study suggests two measures: strengthening domestic energy production and implementing hedging strategies to mitigate the impact of oil price fluctuations on foreign debt. Furthermore, the analysis explores the influence of terms of trade on employment, interest rates, capital costs, net oil imports, final output, and agricultural product exports. These indicators are affected by changes in terms of trade, driven by factors such as increased productivity, shifts in comparative advantage, and market dynamics. Overall, this study emphasizes the significance of terms of trade in shaping economic dynamics and provides insights into policy measures to enhance energy security, reduce oil import dependency, and promote economic resilience in net oil-importing countries.

Global impacts of oil price shocks: the trade effect

PurposeOil price shocks greatly impact the global economy, but the effects vary among countries. While higher oil prices benefit oil-exporting countries, they harm the economic performance of oil-importing nations, and vice versa for lower oil prices. However, economic relations, such as trade, can mitigate the impacts of oil price shocks on both groups. In this paper, the authors aim at estimating the effects of oil price shocks on the major net oil-exporting and net oil-importing countries while accounting for international trade.Design/methodology/approachThe authors derive a reduced form of a macro model and set up a Panel VAR model to estimate the direct and indirect impacts of oil price shocks on economic growth. The sample includes data on macroeconomic variables from 30 oil-exporting and oil-importing countries that comprise more than 73 percent of the world's economy. The authors construct the spillover variables using bilateral trade matrix. To control for institutional and structural variations across the countries, they are divided into four groups of developed and developing oil-exporting and oil-importing countries.FindingsThe results reveal that all oil-exporting countries have significantly benefited from oil price shocks, although trade has dampened the effect. The positive growth effect has been more pronounced in oil-exporting developing countries. The impact of oil price shocks on oil-importing countries has been negative with a one-year delay, but not statistically significant, and trade has only had a small effect. The effect has been more substantial in oil-importing developing countries.Research limitations/implicationsOne of the limitations of this study is the focus on trade as the main spillover channel. Given the data availability, other channels such as foreign investment and financial markets can also be included in future studies.Practical implicationsRemoving trade restrictions would help both oil-exporting and oil-importing countries to mitigate the negative impacts of the oil price shocks. However, the asymmetric oil-macroeconomy relationship across oil-exporting and oil-importing countries puts oil-exporting countries in a more vulnerable position as they cannot rely on trade with oil-importing countries to reduce the negative impacts of lower oil prices on their growth. Therefore, it is crucial for oil-exporting countries to reassess their oil-dependent development plans and invest their oil revenues in non-oil sectors to diversity their economies and prepare for a future with reduced dependence on oil.Social implicationsThe recent technological advances, structural changes, and increasing energy efficiency suggest that major oil-importing countries will become less dependent on oil in near future. As a result, oil-exporting countries will also need to undergo structural changes in order to sustain their income level. These significant changes will have important social implications, particularly in the labor market, during the transition, for which preparation will be necessary.Originality/valueWhile the literature on the total impact of oil price shocks on either oil-exporting or oil-importing countries is rich, studies on their spillover impacts are limited. Recent research has shown that trade and migration can affect the impact of oil price shock on the economy in federated countries such as Canada. However, the trade effect on oil price shocks in the international level, where countries are subject to different regulations/restrictions and institutional variations, remains scarce. By considering the trade relationship between different groups of oil-exporting and oil-importing countries, the authors aim to contribute to the literature of the global impacts of oil price shocks on the world economy.

Nexus of energy and food nutrition prices in oil importing and exporting countries: A panel VAR model

This study explores the relationship between energy and food nutrition prices through food calorie, fat, protein, and crude oil price links in the case of eight net oil importing (U.S., Korea, China, and Japan) and exporting (Canada, Saudi Arabia, United Arab Emirate, and Iran) countries. For this purpose, we use a Panel-VAR model with data for the 1974–2018 period. The results show that the effects of oil prices shocks on food nutrition prices are different in the two groups of countries. These effects, in oil importing countries, are initially declining and then adjusts over several periods while they are incremental and meaningful for oil exporting countries. In addition, the effects of real gross domestic product (GDP) and exchange rates on food nutrition prices are statistically significant in the oil exporting countries, while they have no direct effect on the food calorie and fat prices in the net oil importing countries. These results suggest that crude oil price, income, and exchange rate policies play an effective role in controlling hunger levels and improving food security in oil-exporting countries.

Asymmetric impacts of disaggregated energy consumption and oil price fluctuations on the MENA net oil-exporting and importing economies.

This paper asymmetrically analyzes the impact of energy consumption and oil price fluctuations on the economic growth of the MENA net oil-exporting and importing nations from 1990 to 2019 using panel nonlinear autoregressive distributed lag (PNARDL) model developed by (Salisu and Isah, Econ Model 66:258–271, 2017). The findings revealed that for the net-oil exporting countries, the impact of nonrenewable energy on economic growth is nonlinear in both terms, where in the both terms, high consumption of nonrenewable energy is influencing economic growth and its low consumption is limiting it. Furthermore, the impact of renewable energy is linear and it is influencing and limiting economic growth in both terms respectively. Moreover, the impact of oil price fluctuations on economic growth is linear in the long run and nonlinear in the short run, where in the long run, increase in it is not influencing economic growth but in the short run, while its decrease has no effect. For the net-oil importing countries, the impact of nonrenewable energy on economic growth is nonlinear in both terms, where in the long run, high consumption of nonrenewable energy is influencing economic growth but in the short run, it is discouraging it; however, in both terms, low consumption of nonrenewable energy has no effect. In addition, in the long run, the impact of renewable energy is nonlinear but linear in the short run; however, none of its impacts is significant in both terms. Also, the impact of oil price fluctuations on economic growth is linear in both terms and in the both terms, it is influencing economic growth. Nonetheless, for all the variables, the impacts are higher in the net-oil exporting countries. Policy recommendations were provided.

Renewable and non-renewable energy consumption – Ecological footprint nexus in net-oil exporting and net-oil importing countries: Policy implications for a sustainable environment

Despite the numerous studies on the role of energy consumption in environmental degradation, there is scarcity of comparative empirical information on the net oil-importing and net oil-exporting countries. Using the Augmented Mean Group (AMG) that is robust to cross-sectional dependence, non-stationarity, heterogeneity and structural breaks to comparatively assess the impact of non-renewable and renewable energy consumption on ecological footprint, we find that non-renewable energy consumption in both country groups significantly contributes to environmental degradation. However, the impact is greater for the net oil-exporting countries due to their high level of dependence on crude oil, poor development and consumption of renewable energy, and energy inefficiency. On the other hand, renewable energy consumption is found to be significant only for the net oil-importing countries. The coefficient is expectedly negative, suggesting a reduction in environmental degradation. Its insignificance in the net oil-exporting countries also lends credence to its poor development and consumption due to the huge reliance on oil.

Investigating the Relationships between Renewable Energy Consumption, Socio-Economic Factors and Health: A PVAR Analysis from MENA Net Oil Importing Countries

In this paper, we tried to contribute to the previous literature by analyzing the relationship between renewable energy consumption, socio-economic factors and health in the presence of a stringent environmental policy and lobbying power. Using a Panel Vector Auto-Regressive (PVAR) technique, we specifically examine the role of the government effectiveness and the lobbying pressure in moderating the impact of renewable energy consumption on CO2 emissions, economic growth and health factor considering the case of Middle East and North Africa (MENA) Net Oil Importing Countries (NOICs) from 1996 to 2019. Our analysis shows that (i) environmental policy stringency and good governance will induce a rise in the level of renewable energy consumption; (ii) lobbying power and interest groups discourage the renewable energy sector’s development since the add in economic growth of these economies is not oriented towards renewable energy projects; (iii) a rise in renewable energy consumption, perhaps generated by renewable energy policies, should favor the improvement of public health. Finally, the political implications of the findings are summarized and discussed.

Shock and volatility spillovers between oil and emerging seven stock markets

Purpose This study aims to examine the volatility spillover effects between oil and stock returns in the emerging seven economies. Design/methodology/approach In this study, the Granger causality test and vector autoregression-generalized autoregressive conditional heteroskedasticity approach to analyze the volatility spillover from 1995 to 2019 were used. The findings provide evidence of significant volatility spillover between oil and Brazil, China, India, Indonesia, Mexico, Russia and Turkey (E7) stock markets. Findings All emerging seven stock markets exhibit positive and low constant conditional correlations with oil assets. The magnitude of the correlation changes in respond to the country’s net position in the crude oil market. While a relatively high level of correlation exists between oil and the stock markets of net oil-exporting countries, a relatively low level of correlation exists between oil and the stock markets of net oil-importing countries. Originality/value The findings suggest that oil asset improves the risk-adjusted performance of a well-diversified portfolio of stocks. However, investors should invest a larger portion of their portfolios in E7 stock markets than in oil.

A PANEL DYNAMIC ANALYSIS ON ENERGY CONSUMPTION, ENERGY PRICES AND ECONOMIC GROWTH IN NEXT 11 COUNTRIES

This study empirically examines the impacts of energy consumption and energy prices on economic growth for three data sets of panel groups of Next 11 countries within a multivariate panel framework over the period 1990-2013. For the entire panel group of Next 11 countries, it is obtained from the results of panel Autoregressive Distributed Lag estimation approach that, energy consumption has a positive and energy prices have a negative impact on economic growth, both in the long-run and short-run; and a unidirectional causal linkage between economic growth and energy consumption is confirmed by the results of panel causality tests. For the 6 of Next 11 net oil-importing countries panel group, it is found from panel Dynamic Ordinary Least Squares method that, economic growth is negatively influenced by both energy consumption and energy prices. The results of panel Autoregressive Distributed Lag estimation approach for the 5 of Next 11 net oil-exporting countries panel group portrays that, in the long-run, energy consumption negatively affects economic growth and energy prices positively influence economic growth, while in the short-run, economic growth is negatively affected by both energy consumption and energy prices.Keywords: Energy Consumption; Energy Prices; Economic Growth; Next 11 CountriesJEL Classifications: C33; C51; Q4; Q43DOI: https://doi.org/10.32479/ijeep.9880

COVID-19 and the Oil Price – Stock Market Nexus: Evidence From Net Oil-Importing Countries

This study focuses on the relation between stock price returns and oil price returns covering the COVID-19 period. This relation is examined for major net oil-importing Asian countries. Utilizing daily data, we fit a DCC-GARCH model. We find evidence of a positive co-movement between oil price returns and stock price returns during the COVID-19 period. This indicates that falling oil prices act as a negative signal for the stock market.

Does oil price have similar effects on the exchange rates of BRICS?

Motivated by the crucial status of oil price and exchange rates in world finance and economy, we apply daily data from August 2005 to February 2019 to investigate the impact of oil price shocks on the exchange rate of BRICS countries. This paper first adopts a new framework and EEMD method to decompose oil shocks and exchange rate series, respectively. With these econometric methods, the final research variables in this paper are constructed, including two types of oil shocks and three kinds of exchange rate series. The ARDL approach and VAR model are then employed to detect the influence of oil shocks on exchange rates in different frequencies, corresponding to the stationarity of series. The evidence, based on the original exchange rate series reveals that two oil price shocks can produce different effects on net oil-importing countries and net oil-exporting countries, while the results from different frequencies show that exchange rates will have a significant response to oil shocks only at a high frequency. It is worth noting that China is a unique case in BRICS, the relations between its exchange rate and oil price shocks is far insignificant than that of the other countries.

Oil shocks and stock volatility: new evidence via a Bayesian, graph-based VAR approach

ABSTRACTThis article examines the temporal dependence between three oil shocks and realized volatility in the stock markets of G20 countries between 1994 and 2019. By applying a novel, graphical, Bayesian VAR (BGVAR) model, we calculate unidirectional linkages of oil and stock volatility with a full and segmented sample. The results suggest an overall causality from stock volatility to oil shocks. For certain short, specific periods, the causal direction reverses. Depending on the country and the source of an oil shock, the magnitude and type of the effect can vary considerably. Specific oil-market shocks occur most often in our full sample. In a time-varying structure, oil supply shocks’ impact on stock volatility is more prominent, and net oil-importing countries’ responses to these shocks are greater than for oil-exporting countries. In addition, we find that relationship dynamics can capture market information, such as global economic growth during the 2008–2009 financial crisis.

Implications of oil price shocks on net oil-importing African countries

The study examines the implications of oil price shocks on developing net oil-importing countries. The study considers the casual relationship, impulse response function, and vector decomposition between oil prices and macroeconomic variables using an unrestricted vector autoregressive (VAR) model. In addition, other robust econometric techniques were applied to the time series of oil prices, GDP per capita (GDPC), and energy consumption from 1980 to 2015. Mix results were obtained for the selected African countries - Cape Verde, Liberia, Sierra Leone, and The Gambia. Evidence from the granger test shows that oil prices cause GDPC in Liberia and Sierra Leone. Furthermore, analyses from the VAR model and Impulse response indicate that oil price increase will temporarily increase GDP per capita in the short run for the selected countries. The study recommends policies that can effectively mitigate the adverse effect of the oil price increase.

Argentina set to increase gas and oil production

This study explores the relationship between energy and food nutrition prices through food calorie, fat, protein, and crude oil price links in the case of eight net oil importing (U.S., Korea, China, and Japan) and exporting (Canada, Saudi Arabia, United Arab Emirate, and Iran) countries. For this purpose, we use a Panel-VAR model with data for the 1974–2018 period. The results show that the effects of oil prices shocks on food nutrition prices are different in the two groups of countries. These effects, in oil importing countries, are initially declining and then adjusts over several periods while they are incremental and meaningful for oil exporting countries. In addition, the effects of real gross domestic product (GDP) and exchange rates on food nutrition prices are statistically significant in the oil exporting countries, while they have no direct effect on the food calorie and fat prices in the net oil importing countries. These results suggest that crude oil price, income, and exchange rate policies play an effective role in controlling hunger levels and improving food security in oil-exporting countries.

Dynamic relationship of oil price shocks and country risks

This study investigates the dynamic relationship between oil price shocks and country risks using a Structural VAR framework for a sample of both net oil-exporting and net oil-importing countries over the period January 1994–December 2014. The results reveal that country risk is significantly affected by oil price shocks, but the impacts are different. Unanticipated positive oil price shocks trigger a reduction (addition) in country risk for net oil-exporting country (net oil-importing countries). As to the responses of oil prices to country risk shock, evidence show that country risk shocks have a delayed significantly positive impacts on oil price for oil-exporting country. With respect to the effects of subcomponents of country risk, we find evidence that economic and political risk have a significant impact on supply-side shocks in net oil-exporting countries like Canada, while economic and political risk have a significant effect on supply-side shocks and oil specific demand shocks in net oil-importing countries like the US. These results are particularly important to policy makers and government.

Oil Price Fluctuations and Current Accounts in Oil-Importing Countries: The Role of Financial Development

Recent empirical studies provide evidence that financial deepness or the lack thereof plays a significant role in the oil price-current account nexus for oil-exporting countries. While oil price fluctuations are known to negatively impact the current account positions of net oil-importing countries, their experience in relation to the level of financial development remains largely unaddressed in the literature. Relying on panel smooth transition regressions, this paper examines whether heterogeneous levels of financial development matter in explaining the sensitivity of current account to oil price fluctuations for a panel of 46 net oil-importing countries. The results show that the negative effect of oil price fluctuations on current accounts is non-linear and crucially depends on the degree of financial development of oil-importing countries. Specifically, oil price fluctuations exert a weaker impact on the current account position of more financially developed countries, this influence intensifies for less financially developed countries.

Dynamic spillovers of oil price shocks and economic policy uncertainty

This study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil-exporting and net oil-importing countries over the period 1997:01–2013:06. To achieve that, an extension of the Diebold and Yilmaz (2009, 2012) dynamic spillover index based on structural decomposition is employed. The results reveal that economic policy uncertainty (oil price shocks) responds negatively to aggregate demand oil price shocks (economic policy uncertainty shocks). Furthermore, during the Great Recession of 2007–2009, total spillovers increase considerably, reaching unprecedented heights. Moreover, in net terms, economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009, while in the post-2009 period there is a significant role for supply-side and oil specific demand shocks, as net transmitters of spillover effects. These results are important for policy makers, as well as, investors interested in the oil market.

Oil Price Fluctuations and Changing Comparative Advantage

This paper attempts to quantify the effects of oil price fluctuations on revealed comparative advantage (RCA) for 36 manufacturing commodities of 167 countries over a 16-year period from 1990 to 2005. Using Zellner’s (1962) seemingly unrelated regression (SURE) model, the negative effects of oil price fluctuations on RCA vary according to objectives and model specification. Oil price fluctuations negatively affect manufacturing commodities’ RCA in 1997-2005 more than in 1990-1996 periods. The paper also found that oil price fluctuations negatively affect middle-income economies and net oil-exporting countries’ RCA more than high-income economies and net oil-importing countries.

Financial and monetary policy responses to oil price shocks: evidence from oil-importing and oil-exporting countries

In this study, we investigate the financial and monetary policy responses to oil price shocks using a Structural VAR framework. We distinguish between net oil-importing and net oil-exporting countries. Since the 80s, a significant number of empirical studies have been published investigating the effect of oil prices on macroeconomic and financial variables. Most of these studies though, do not make a distinction between oil-importing and oil-exporting economies. Overall, our results indicate that the level of inflation in both net oil-exporting and net oil-importing countries is significantly affected by oil price innovations. Furthermore, we find that the response of interest rates to an oil price shock depends heavily on the monetary policy regime of each country. Finally, stock markets operating in net oil-importing countries exhibit a negative response to increased oil prices. The reverse is true for the stock market of the net oil-exporting countries. We find evidence that the magnitude of stock market responses to oil price shocks is higher for the newly established and/or less liquid stock markets.