Oil-importing Countries Research Articles

OIL PRICES SHOCKS AND GOVERNMENT EXPENDITURE

This study employs the vector autoregressive model (VAR), impulse response function and variance decomposition to study the impact of oil price shocks on components of government spending on both oil-exporting and oil importing countries over the period from 1980 to 2018. While the vast majority of previous studies focused on the impact of oil price shocks on government spending, this study emphasized the impact of these shocks on the current and capital government expenditure. It was found that oil price shocks affect government current expenditure positively in the two groups of countries. While it affects government capital expenditure positively in oil-exporting countries and negatively in oil-importing countries.Keywords: Oil-exporting countries, Oil-importing countries, Oil price, VAR model, government expenditures.JEL Classifications: H5, O13, Q43DOI: https://doi.org/10.32479/ijeep.11172

The Impact of Oil Price Fluctuation on the Price of Agricultural Products Considering the Food Crisis Periods

Introduction: Fluctuations of oil price and petroleum products have had different effects on great economic variables. One of these cases would be Dutch Disease in some countries. The aim of this paper is to study The effect of Oil Price Fluctuation on the Price of Agricultural Products. Materials and Methods: In this paper we used the PVAR method. The statistical information of 14 oil-importing countries and 10 oil-exporting countries in the time period of 1990-2018 was used. The variables used in this study include corn price logarithm, rice price logarithm, soybeans price logarithm, wheat price logarithm, barley price logarithm, real currency rate logarithm, crude oil price logarithm, world oil production logarithm, world real economic activity logarithm and oil safety reserve logarithm. Findings: The price reaction of these products to oil shocks, total demand and merchandise market are similar and meaningfully positive in both oil exporting and oil importing countries in terms of direction, intensity and pattern. The results indicate that the oil price shocks lead to an increase in the price of agricultural products. Conclusion: It seems that to The results concluded out of price change estimations of agricultural products (corn and soybeans in particular) show that in addition to direct effect, oil shocks indirectly influence the price of agricultural products via total supply and demand shocks.

Oil shocks and the Economic Growth: A Study for Oil-importing and Exporting Countries in the Time of Covid-19

This article discusses the effect of the oil shock on some OECD oil-importing countries such as Canada, France, Italy, China, and the United States and some OPEC oil-exporting countries such as Algeria, Iran, Kuwait, Saudi Arabia, and Venezuela. The model is estimated for the years 1976-2021. five annual variables are used for each country. The variables within the model include real oil prices, GDP growth, inflation, real wages, and real effective exchange rates. Real GDP is the main variable that shows the effects of oil prices on the economy, and the impact of oil prices on other model variables will indirectly affect economic activities. For this purpose, we estimate the vector autoregression model. Estimates obtained for different countries show that oil price shocks are one of the variables affecting economic growth. Also, in oil-exporting countries, oil shocks on economic growth are positive and negative in oil-importing countries. Also, Covid-19 is studied as an effective parameter in creating oil shocks.

Volatility spillovers and hedging effectiveness between oil and stock markets: Evidence from a wavelet-based and structural breaks analysis

This study addresses the key issues related to the connectedness, volatility spillovers (VS), and hedging effectiveness between the oil and the stock markets in top oil-importing and oil-exporting countries over different investment horizons. Our work extends previous research on the VS between the oil and stock markets by detecting and incorporating structural breaks in variance in a wavelet-based multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) framework. We also use cross-wavelet coherence analysis, which is an alternative method to investigate the interdependence and analyze the time–frequency co-movements and lead–lag relationship between oil prices and stock indices. Using daily data over the period 2001–2017, we find that the model with structural breaks outperforms the one without and generates better estimates. The results suggest that the price spillovers and VS exist but are strongly dependent on the studied stock markets and mostly on the time scale. Spillovers are more important in the long run, indicating a higher interdependence between oil and stock indices. Volatility spillover results are homogeneous between groups of oil-exporting and oil-importing countries and seem to be country-specific. All hedge ratios (HRs) indicate that all studied indices are good hedges for oil. India and China are the countries offering the most profitable hedging opportunities with oil over all investment horizons. The wavelet coherence analysis shows that the correlation is high in the very long term and is more important for oil-exporting countries.

Does geopolitical risk improve the directional predictability from oil to stock returns? Evidence from oil-exporting and oil-importing countries

We examine the nonlinear dependence structure between oil (WTI, Brent, Gas oil, Heating oil) and the stock market returns for 14 emerging market indices in oil-exporting and oil-importing countries before and after conditioning upon geopolitical risk using a novel developed quantile dependence approach – cross-quantilogram. When the dependence structure of oil prices with the stock markets of major oil-exporting and oil-importing countries is analyzed without controlling for the geopolitical risk, we do not find any significant dependence. However, after conditioning for geopolitical risk factors, we find the evidence of significant positive (negative) quantile dependence when both oil and stock returns are in the same (either in lower and middle) quantiles of the distribution. Further, the response of oil-exporting equity markets to oil shocks is significantly higher and more persistent than that of oil-importing countries. Results are crucial for diversification benefits and strategy decision making. Since serious geopolitical risk leads to high directional predictability spillover from oil to the stock markets of oil-exporting and oil-importing stock markets, investors and portfolio managers should be cautious when formulating their portfolios and making good hedging strategies. In terms of diversification, it is more suitable for international investors to construct a portfolio of stocks in net oil-importing instead of net oil-exporting countries under geopolitical risk control.

The impact of oil price volatility on stock markets: Evidences from oil-importing countries

This study investigates the effects of oil price volatility on stock markets. We consider the stock returns of ten major oil-importing countries: China, France, Germany, India, Italy, Japan, Korea, the Netherlands, Spain, and the U.S. from May 2001 to December 2019. To obtain a complete picture of the relationship between oil price volatility and stock returns, we apply both quantile regression and quantile-on-quantile regression approaches. Our empirical results indicate that oil price uncertainty has asymmetrical effects on stock returns; moreover, these asymmetric behaviors vary depending on not only the level of stock returns but also oil market conditions. The results show that increasing oil price volatility has a negative effect on stock returns when both oil price volatility and stock returns are low. However, when stock returns are high and oil price volatility is low, rising oil price volatility causes an increase in stock returns.

Global oil risk price management in Iran and Russia

Oil is one of the most important sources of income for oil-exporting countries such as the Russian Federation and Iran, as well as the main raw material in the production process in oil-importing countries. Risks fluctuations in world oil prices can cause sovereign financial risks of instability in macroeconomic variables in both groups of oil exporting and importing countries. Negative shocks in world oil prices for countries such as Iran and Russia, whose economic structure is oriented towards oil and provides a significant part of the state budget through oil, could have significant consequences for the economies of these countries. Such fluctuations not only affect the economies of oil-importing countries, but are also one of the main causes of disruptions in the economies of oil-exporting countries. This study examines the government's management of risk fluctuations in world oil prices and its actions in Iran and Russia. The results of this study show that Iran and Russia, as sanctioned countries and oil exporters, have taken various measures to deal with these shocks, the most important of which is the creation of sovereign wealth funds in the two countries. In this article, the characteristics of national development funds in Iran and Russia are compared. The differences between Iran and Russia in risk management and the structure of these funds are shown.

Is the geopolitical risk an incentive or obstacle to renewable energy deployment? Evidence from a panel analysis

This study explores the effect of geopolitical risk on renewable energy deployment, assuming that geopolitical uncertainty stimulates nations to be independent and rely on their renewable energy sources in order to reduce the geopolitical risk concomitant to fossil fuel inflows. The current paper's data sample covers 10 net crude oil importer countries during the period 1985–2017. It employs panel cointegration analysis and estimate an autoregressive distributed lag model. The results show that geopolitical risk has a significant and positive effect on renewable energy diffusion. Therefore, this work determines that it is an incentive, not an obstacle, to renewable energy deployment. The present study's policy implication is that renewable energy development is expected to increase if the geopolitical risk rises, all else being equal.

How Do International Conflicts Impact China’s Energy Security and Economic Growth? A Case Study of the US Economic Sanctions on Iran

International conflicts cause global energy price fluctuations and supply disruptions, which can threaten energy security and economic growth in energy-importing countries, including China. However, the implications and impact mechanisms of international conflicts on the energy security and economy of oil-importing countries have been poorly explored. Using US economic sanctions on Iran as a case, a global energy-extended computable general equilibrium model, GTAP-E, is employed to assess the impacts of international conflicts on China’s energy production, trade and supply, sectoral outputs, and economic growth. The results indicate that the USA–Iran tension would threaten China’s energy security, mainly due to the instability of the energy supply and the consequent upsurge of energy prices. However, if increased oil exports from other Persian Gulf countries compensate for the global oil supply shortages, China’s energy supply would be generally assured. Moreover, because of the close energy cooperation links between Iran and China, the sanctions could decrease the Chinese outputs of non-energy sectors and economic growth. Nevertheless, compared with sole-sanction situations, the results from a possible USA–Iran tension escalation, going as far as Iran’s closure of the Hormuz Strait, could pose a more serious risk to China’s energy security and economic growth.

Modeling the frequency dynamics of spillovers and connectedness between crude oil and MENA stock markets with portfolio implications

This paper examines the frequency of spillovers between crude oil futures and the Middle East and North Africa (MENA) stock markets. We use the methodologies proposed by Diebold and Yilmaz (2012) and Baruník and Křehlík (2018) and the wavelet coherency approach. The results show time-varying volatility spillovers in the considered markets. The short-term spillovers are higher than their intermediate-term counterparts. The highest jump in spillovers occurs during the COVID-19 outbreak, followed by the global financial crisis and the recent oil price crash. The spillovers are higher for oil-exporting countries than oil-importing countries. Saudi Arabia, Qatar, and the United Arab Emirates (UAE) are the main contributors to spillovers in the short and intermediate terms. Brent oil, Egypt, Morocco, and Turkey are the net receivers of spillovers in the short term, and they switch to become net contributors to spillovers in the intermediate term. Turkey and oil-exporting stock markets receive more spillovers than oil-importing stock markets irrespective of the time frequency. Wavelet analysis shows evidence of co-movements between oil futures and stock markets at intermediate and low frequencies. The lead–lag relationships between crude oil and stock markets are mixed and time-varying. Moreover, a mixed portfolio offers diversification benefits. Hedging is more expensive during the pandemic period and particularly in the intermediate term compared to the short term. Hedging effectiveness is highest during the COVID-19 pandemic in the short and intermediate terms for almost all markets.

OIL PRICE FLUCTUATION AND CURRENT ACCOUNTS: EXPLORING MEDIATION EFFECTS FOR OIL IMPORTING NATIONS

The study is an attempt to examine empirically the effects of oil price shock on current account imbalances. The analysis is carried out on the cross-country panel of 160 countries that are divided into three different groups base on their level of oil imports. The relationship between the oil price shock and current account imbalances is rigorously assessed using two different approaches. Firstly, the seemingly unrelated regression models are used to estimate the effects of oil price shock on current account imbalances with transmission channels namely trade, valuation, and wealth. Secondly, to examine the indirect effects of oil price shock three different mediator effects that direct, indirect, and total are estimated. The findings of the study reveal that for all three groups of countries the oil price shock pose a positive effect on the current account through the trade channel. Whereas, the current account of all three groups is negatively associated with oil price shock with the wealth channel. The valuation channel holds a mix results across country groups about the effect of oil price shock on the current account balances. In the case of low and major oil importer countries, oil price shock is negatively associated with the current account, whereas the current account of medium oil importer countries is improving with an increase in oil prices. The mediation analysis holds mix results across groups of countries. Keywords: Current-account imbalances; oil importing economies, seemingly unrelated regression; mediation effectsJEL Classifications: F4; F41DOI: https://doi.org/10.32479/ijeep.11044

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.

Global Oil Price and Innovation for Sustainability: The Impact of R&D Spending, Oil Price and Oil Price Volatility on GHG Emissions

Recently, sustainable economic growth has taken the front line of the global development agenda. The common dependency on fossil fuel energy, greenhouse gas (GHG) emissions and the continuous rising demands for energy have posed challenges that put the world in a climate change trap. This work empirically analyzes the effect of innovation, oil price, oil price volatility and economic growth on GHG emissions over the period of 1991–2015. The study compares the emission level between European Union countries (EU) (26), oil-producing countries (22), China and the United States of America (USA) using the Driscoll–Kraay model. The main empirical finding points to a positive effect of innovation on GHG emission reduction initiatives in oil-importing economies. Particularly, EU countries significantly minimized emissions due to innovation, followed by China and the USA. Contrarily, the effect of innovation increases GHG emission in oil-exporting economies. The results also indicate broader significant effects of oil price and oil price volatility on GHG emission. Interestingly, the effect of oil price on GHG emission is asymmetrical between oil-exporting and -importing economies. Oil price increases in oil-importing countries decrease GHG emission; contrarily, its effect increases emissions in oil-exporting countries. Thus, oil-exporting countries lack motivation to decrease emission levels due to oil price escalation. Unlike the oil price, oil price volatility comparably decreases GHG emissions in oil-exporting and -importing economies. Thus, one might be tempted to take oil price volatility and the future uncertainty of oil price as a virtuous instance rather than oil price increment. Thus, policymakers need to pay attention to market forces and policy measures to monitor GHG emissions due to economic activities. The results are also robust under the alternative econometrics estimation model of generalized method of moments (GMM)-Differenced.

Asymmetric volatility spillover between oil-importing and oil-exporting countries' economic policy uncertainty and China's energy sector

While the relationship between economic policy uncertainty(EPU) and energy market is of great interest to economist, previous research dose not differentiate the effect from oil-importing countries to oil-exporting countries' EPU on the a country's energy sector. In this paper, we address this issue by testing the effect of importer and exporter's EPU on the largest oil-importing country, China, as oil-importing affected greatly by the economic policy. TVP-FAVAR model is applied to obtain the factors and time-varying coefficients of 21 countries' EPU monthly indexes and energy stock realized volatility. We find that the Chinese energy sector's stock volatility is positively related to EPU shocks and that bad volatility has a stronger impact than good volatility. Second, the volatility spillover from oil-exporting countries' EPU on the Chinese energy sector is stronger than that from oil-importing countries' EPU, with a stronger effect for bad volatility than for good volatility. Finally, The bad volatility spillover and spillover asymmetry is stronger during the crisis periods, such as the debt crisis, energy contention, oil price turbulence, or limited production agreement, both symmetric and asymmetric spillovers increase. Our findings have potentially important implications for the regulators and investors on Chinese oil market with different types of countries' EPU.

Oil price shocks and inflation rate persistence: A Fractional Cointegration VAR approach

This study investigates the effect of oil price shocks on the inflation persistence of the top ten (10) oil-exporting and oil-importing countries. The study employs the recently developed fractional cointegration vector autoregressive (FCVAR) approach. It accounts for the role of monetary policy framework and exchange rate regime. It also tests and accounts for oil price asymmetry. The results show that inflation rate persistence of oil-exporting and oil-importing countries does not increase due to oil price shocks suggesting that the monetary policy of these countries accommodates oil price shocks, and may not necessarily be changed due to oil price shocks. This holds for countries operating floating regimes and inflation targeting, and those operating pegged regimes and non-inflation targeting monetary policy framework. The monetary policy of oilimporting countries appears to accommodate oil price shocks. As failure to account for oil price asymmetry tends to exaggerate inflation persistence for both oil-exporting and oil-importing countries, the conclusions do not change markedly. This result is consistent after accounting for oil price asymmetry, under positive and negative oil price shocks.

Dependence between oil price changes and sectoral stock returns in Pakistan: Evidence from a quantile regression approach

This study explores the dependence between changes in world crude oil prices and the performance of the Pakistan Stock Exchange, at the aggregate as well as sectoral levels for the period from July 1997 to December 2016. Quantile regression approach is employed for a detailed examination of the structure and degree of dependence for three sub-periods corresponding to normal, rising, and falling oil price periods. We found that the dependence between changes in crude oil price and the sectoral stock returns is heterogeneous across industries and it exists in both bullish and bearish market trends. The dependence at the upper and lower quantiles is found to be a common feature across industries. Moreover, the dependence and direction of the relationship change at times of structural breaks. The findings highlight an external channel through which fluctuations in stock returns may impede the liquidity of the stock market of an oil-importing country such as Pakistan, thereby affecting the domestic economy.

Responses of macroeconomy and stock markets to structural oil price shocks: new evidence from Asian oil refinery

In extensive oil-related literature, less attention has been paid to Asia and particularly little evidence is known for oil-refining countries. This paper examines how the economy of an oil-refining country reacts to an oil price shock and performs cross-country comparisons with oil-exporting and oil-importing countries. Singapore (oil refiner), Japan (oil importer), and Malaysia (oil exporter) are analysed through a structural vector autoregression (SVAR) model using both macroeconomic and financial variables. Results show limited reactions of both macroeconomic indicators and stock returns to an oil supply shock, and an oil aggregate demand shock negatively impacts economic activities. Our findings reveal that the country's status in the oil market is important when an oil-specific demand shock is analysed. Our findings inform policymakers of the effectiveness of using monetary policy tools such as interest rate and exchange rate to mitigate the adverse effects of an oil price shock.

Responses of macroeconomy and stock markets to structural oil price shocks: new evidence from Asian oil refinery

In extensive oil-related literature, less attention has been paid to Asia and particularly little evidence is known for oil-refining countries. This paper examines how the economy of an oil-refining country reacts to an oil price shock and performs cross-country comparisons with oil-exporting and oil-importing countries. Singapore (oil refiner), Japan (oil importer), and Malaysia (oil exporter) are analysed through a structural vector autoregression (SVAR) model using both macroeconomic and financial variables. Results show limited reactions of both macroeconomic indicators and stock returns to an oil supply shock, and an oil aggregate demand shock negatively impacts economic activities. Our findings reveal that the country's status in the oil market is important when an oil-specific demand shock is analysed. Our findings inform policymakers of the effectiveness of using monetary policy tools such as interest rate and exchange rate to mitigate the adverse effects of an oil price shock.

Asymmetric effect of oil prices on stock market prices: New evidence from oil-exporting and oil-importing countries

This paper examines the short-run and long-run effect of oil prices across bullish, bearish, and normal states of the stock markets in oil-exporting and oil-importing countries where oil-exporting countries include Russia, Mexico, Venezuela, and Norway and oil-importing countries include India, China, Japan and Norway. For this purpose, we use quantile ARDL model and compare its findings with the standard nonlinear ARDL model. Moreover, this study uses quantile nonlinear ARDL model where oil price series is decomposed into positive and negative oil price shocks. The nonlinear ARDL estimates do not support co-integration in the long-run whereas, in the short-run, it supports asymmetric effect in all countries except Norway. Besides, the quantile ARDL estimates indicate that oil prices asymmetrically affect stock prices both in the short-run and long-run and for all sample countries. Finally, the empirical estimates of the quantile nonlinear ARDL model are consistent with the estimates from the quantile ARDL model. The findings of this study provide important policy implications for investors, policymakers and other stakeholders.

THE EFFECT OF OIL PRICES ON INDUSTRIAL PRODUCTION IN OIL-IMPORTING COUNTRIES: PANEL COINTEGRATION TEST

The industrialization levels of the countries are an indicator of development. Countries trying to increase their production in the industrial sector prefer to have access to energy in a cheap and easy way. However, economies that do not have sufficient energy reserves may be affected by the changes in energy prices since they will import the necessary energy input. Although there are many studies discussing the effects of energy or oil prices on macroeconomic variables in countries, the research based on industrial production is limited. In this study, the long-term relationship between the changes in oil prices and industrial production in the ten most oil-importing countries (China, Germany, India, Italy, Japan, Netherlands, South Korea, Spain, United Kingdom and United States) was analyzed by Pedroni, Kao and Johansen Fisher cointegration tests. According to the empirical findings of the study, it is concluded that the relationship between the industrial production of oil importing countries and oil prices is positive. This situation can be interpreted as these countries with high levels of industrialization process the crude oil and market the products they produce to foreign countries more profitably.