Positive Oil Price Research Articles

Efectos de los auges y la crisis del petróleo en la economía colombiana: un enfoque autorregresivo vectorial variable en el tiempo

El propósito de este documento es estimar el impacto de los choques de precios y producción de petróleo en variables macroeconómicas como la deuda pública, el tipo de cambio real y la actividad económica colombiana. Este país depende en gran medida de las exportaciones de petróleo, lo que podría conducir a diferentes obstáculos en el manejo macroeconómico cuando los precios y la producción de petróleo registran fluctuaciones. El documento describe la importancia del petróleo en Colombia, que pasó de ser un país completamente importador en 1976 a una economía exportadora de petróleo en 1986. El análisis empírico utiliza una metodología de vectores autorregresivos con parámetros cambiantes en el tiempo, que supone que la relación entre los precios y la producción de petróleo con las variables macroeconómicas cambia dinámicamente. Los resultados confirman que existen diferentes patrones de volatilidad estocástica de las variables incluidas en el modelo. De acuerdo con las funciones impulso-respuesta, los choques positivos del precio del petróleo no causaron efectos significativos en el tipo de cambio real ni en la deuda pública. Sin embargo, el choque negativo de los precios en 2015 condujo a una depreciación real y a un aumento de la deuda pública.

The effect of oil price shocks on asset markets: Evidence from oil inventory news

AbstractWe quantify the reaction of U.S. equity, bond futures, and exchange rate returns to oil price shocks driven by oil inventory news. Across most sectors, equity prices decrease in response to higher oil prices before the 2007/2008 crisis but increase after it. Positive oil price shocks cause a depreciation of the U.S. dollar against a broad range of currencies but have only a modest effect on bond futures returns. The evidence suggests that changes in risk premia help to explain the time‐varying effect of oil price shocks on U.S. equity returns.

Asymmetric Responses of Economic Growth to Daily Oil Price Changes: New Global Evidence From Mixed-Data Sampling Approach

Our paper inspects empirically the asymmetric impact of daily oil price shocks on the quarterly real domestic product in eight countries during the period (1983-2016). We employ two methodologies OLS and AMIDAS. The OLS technique shows that the positive oil price shocks have a statistically significant negative effect on economic growth in all the countries and vice versa. In addition, it reveals that this relationship could be either symmetric or asymmetric in all the countries. On the contrary, the AMIDAS gives more important details and proves that all the relationships in our sample data are asymmetric. Thus, we think that the AMIDAS technique leads to more accurate results which enhances a better insightful of an energy policy. The policy implication of our paper demonstrates that the energy policies are significant procedures to improve economic performance.

Short- and long-run asymmetric effect of oil prices and oil and gas revenues on the real GDP and economic diversification in oil-dependent economy

Abstract The aim of this paper is to explore the short- and long-run asymmetric impact of oil prices shocks and oil and gas revenues changes on the total real GDP, and the level of economic diversification of the Qatar economy. To this end, two econometric approaches have been used: (1) the A-B structural vector autoregressive (AB − SVARX) model with exogenous variables where four different asymmetric oil prices and oil and gas revenues measures have been employed, and (2) the nonlinear autoregressive distributed lag (NARDL) model. The results show that, in the short-run, the responses of both total real GDP and non-oil real GDP to negative shocks on real oil prices and real oil and gas revenues are higher than the impact of positive shocks, indicating evidence for the existence of asymmetric impact of shocks in the short-run. However, the results suggest that the impact of shocks do not last more than three quarters. This evidence for the existence of asymmetric behavior is also confirmed by the NARDL analysis, which shows that, in the long-run, positive oil prices shocks and oil and gas revenues changes have higher impact on the two proxies of economic activity than negative changes do. A result that confirms the resilience of the Qatar economy to negative shocks and the positive role played by the energy sector in improving the Qatar economic diversification degree. Finally, the results show that the non-oil sector is completely resilient to negative shocks in the long-run as the impact of negative shocks are insignificant on the non-oil real GDP. Several policies aimed to improve the level of economic diversification of the country and delink the government revenues from oil and gas revenues are proposed and discussed.

DISAGGREGATED INFLATION AND ASYMMETRIC OIL PRICE PASS‐THROUGH IN NIGERIA

The oil price – inflation relationship has continued to significantly feature in the macroeconomic debate, a situation that is guaranteed by nineteen oil market disruptions experienced by the world over the last forty years (Verleger, 2019). The debate on the dynamic behavior between oil price and domestic inflation is an ongoing process and recent literature indicated that the relationship shows non-linearities, which could have some implication for monetary policymaking. We estimate NARDL models of the link between oil price and inflation decomposed into CPI sub-indices of food, core, other energy and transport and find support for long-run asymmetry in relation to oil price shocks as well as incomplete pass-through of oil price to inflation. Our results suggest that it takes within 4 - 8 quarters for the disaggregated inflation to converge to its long-run equilibrium after a negative or positive unitary oil price shock. Hence, we conclude that there is the need to boost domestic oil refining capacity and fostering of competition in the domestic market as well as unlocking investment in other bio-fuels and other low-cost energy products to reduce energy imports in Nigeria. Keywords : Oil price shocks, Inflation, NARDL model, Asymmetric pass through, Cointegration JEL Classifications : C12, C22, C32, E31, Q43 DOI: https://doi.org/10.32479/ijeep.8343

Oil Price Asymmetry and Sectoral Output in Nigeria

Disaggregating the Nigerian economy into oil and non-oil sector, this study investigates the asymmetric effects of oil price on sectoral output in Nigeria using data spanning the period between 1981 and 2017. It adopts the novel Nonlinear Autoregressive Distributed Lag (NARDL) model developed by Shin et al. (2014) in which short-run and long-run nonlinearities are introduced via positive and negative partial sum decompositions of oil price. The Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) unit root test results show that the variables used in this study are a combination of I(0) and I(1) series thus justifying the use of the Bounds test approach to cointegration whose result was in the affirmative. The results of the short-run and long-run NARDL models showed that oil price has asymmetric effects on the performance of the oil and non-oil sector of the Nigerian economy in the short-run but only have long-run asymmetric effects on the non-oil sector. In addition, the results revealed that oil price shocks (positive and negative) have positive effects on non-oil output while a positive and negative oil price shock have corresponding effects on oil output in the short run. Moreover, oil price shocks have more effects on the oil sector than the non-oil sector. Hence, this study recommends that the Nigerian economy be diversified to help cushion the effects of the uncertainties associated with the global oil market and to adopt structural reforms in the non-oil tradable sector to stimulate sustainable growth of the economy.

Empirical Analysis of the External Determinants of the Budget Deficit:Case of Morocco

This work aims to examine the effect of external variables on the budget balance in Morocco using annual data for the period (1980-2016). The empirical results of the estimation of the VAR model show that the external variables have direct and indirect effects on the budget balance. A positive oil price shock does not have a significant influence on the budget balance in the short term. But, its indirect long-term effect is significant. Furthermore, a positive shock to the real effective exchange rate generates a widening budget deficit. The degree of trade openness has a positive effect on the fiscal balance in the short and long term.

An Assymetric Evaluation of Oil Price- Inflation Nexus: Evidence from Nigeria

This paper investigates the asymmetric oil price-inflation nexus in Nigeria covering the period of 2009Q1 and 2018Q4. We adopt the Nonlinear Autoregressive Distributed Lags (NARDL) model approach. The result of the study indicates that there exists a nonlinear long run connection between international oil price and inflation in Nigeria which suggests that fluctuations in oil price influence domestic inflation in Nigeria asymmetrically. Further, the result of the study indicates that in the long run, both increase and decrease in global oil price exerts a negative effect on inflation, that is, rise and fall in global oil price will lead to decline in inflation. However, in the short run, increase in global oil price exerts a positive influence on inflation which implies that positive oil price shock is inflationary. The study therefore recommends that government need to source for alternative energy in order to minimize the influence of international oil price shocks on domestic price level.

Asymmetric effects of oil price uncertainty on corporate investment

Using a comprehensive data set of a large panel of US firms over 1984–2017, we show that the negative effect of crude oil price return uncertainty on investments is asymmetric. In particular, we show that investment is more significantly reduced following the volatility of positive oil price changes than that of negative changes, and this asymmetric effect is more pronounced in small firms. In addition, we find that the asymmetric effect is stronger in the crude oil- and gas-producing companies where the effect of the volatility of negative oil price changes is greater than that of positive oil price changes. We also find that the impact of positive or negative oil price change uncertainty on investments substantially differs across different industries. The results are quite robust to the way in which we measure the investment and oil price uncertainty and to alternative regression methods.

Oil Prices and the Stock Markets: Evidence from High Frequency Data

We use the highest frequency data that have ever been studied before to investigate the relationship between the price of oil and stock market returns. In the context of a bivariate (identified using heteroscedasticity in daily data) structural VAR in stock market returns and the change in the price of oil, we find evidence that positive oil price shocks have negative and statistically significant effects on stock market returns. Our results are robust to the use of different types of market returns, including aggregate and disaggregate U.S. market returns, aggregate and disaggregate U.S. excess returns, returns of the energy sector, returns of the major oil and gas companies, and global, eurozone, and some country specific stock market returns. They are also robust to the use of weekly data.

The response of remittances inflows to asymmetric oil price shocks in Egypt

Purpose The purpose of this paper is to explore and analyse the dynamic relationship between remittances inflows of Egyptians working abroad and asymmetric oil price shocks. Design/methodology/approach This study uses a vector autoregressive (VAR) model to explain the impulse response functions (IRFs) and the forecast error variance decomposition (FEVD). The rationale behind using these tools is its ability to examine the dynamic effects of our variables of interest. Findings The impulse response functions confirmed that remittance inflows have various responses to asymmetric oil price shocks. For instance, inflowing remittances increase in response to positive oil price shocks, while it decreases in response to negative oil price shocks. Also, the results indicate that the responses are significant in the short and medium-run and insignificant in the long run. The magnitude of these responses reaches its peak or trough in the third year. Further, the variance decomposition reveals that oil price decreases are more influential than oil price increases. Originality/value This means that remittances inflows in Egypt are pro-cyclical with oil price shocks. That explained by the fact that more than one-half of those remittances sent from GCC countries where real economic growth is very pro-cyclical with the oil prices. This empirical assessment will help policymakers to determine the behaviour of remittances and highlights the impact of different kinds of oil prices shocks on remittances. Unlike the little existing literature, this study is the first study applied the VAR model using a novel dataset spanning 1960-2016.

Estimating a Net Exporter’s ‘Bruising-Soothing’ Effect of Swings in World Oil Price: Evidence From Nigeria

Nigeria is an exporter of crude oil, and hence its revenue typically benefits from a positive oil price shock. However, it simultaneously imports gasoline, which also increases in response to positive oil price shocks. As a result, the net import bill combines these two effects. I use a model to separate the two and show that the bill is dominated by changes in oil price. These effects are asymmetric, with a larger effect with oil price decreases than increase. I find that between Feb 2010 and Nov 2014, a one per cent rise (fall) in the price of oil was equivalent to US$1 (US$1.04) in levels. Consequently, this lifts (lowers) the aggregate oil revenue by US$10.3 million (US$13.9 million); and the per litre price on gasoline by 3 cents (4 cents). Both variables respond more to falling (than to rising) oil price. However, the total average monthly import bill of gasoline during rising oil prices is lower (US$1.16 billion) than during falling oil prices (US$1.25 billion).

Can stale oil price news predict stock returns?

We hand-collect time-series data on positive and negative oil price news from 100 news sources from around the world, covering 59,129 news articles on oil prices. Using time-series predictive regression models estimated for 45 countries, we show that: (a) positive and negative news predict stock returns for at most 12 countries for which the oil price does not predict returns; and (b) together the three oil price measures predict returns for at most 23/45 countries. Therefore, oil price news turns out to be more powerful in predicting returns in a horserace with oil price. We show that the ability of oil to predict returns is through the discount rate and cash flow channels. Our results survive a battery of robustness tests.

Asymmetric oil price shocks, tax revenues, and the resource curse

The paper proposes an asymmetric relationship between oil rents and institutions such that only positive oil windfalls adversely affect institutional quality, and negative oil windfalls have no impact. We test this theory empirically by studying the dynamics of institutional quality in Russian regions. We find that increases in tax revenues caused by exogenous positive oil price shocks do not change regional income but increase corruption and reduce regional democracy and governance quality; declines in tax revenues from negative oil price shocks do not affect institutional quality but decrease regional income.

THE IMPACT OF OIL PRICES ON STOCKS MARKETS: NEW EVIDENCE DURING AND AFTER THE ARAB SPRING IN GULF COOPERATION COUNCIL ECONOMIES

This study investigates the impact of stock price fluctuations on stock markets in six countries in Gulf Cooperation Council (Saudi Arabia, Kuwait, Oman, Bahrain, United Arab Emirates (UAE) and Qatar) during and after the recent geopolitics conflicts, known as Arab Spring, from January 2011 to December 2017. Two statistical models were implemented to measure the relationship between oil price fluctuations and stock markets returns. The logistic smooth transition model (LSTR) was implemented to measure the relationship between oil price direction (positive/negative) and stock markets returns. The exponential smooth transition model (ESTR) was applied to capture the relationship between the magnitude of oil price fluctuations (small/large) and stock markets returns. The results reveal several asymmetrical results of oil price directions (positive/negative) on stock markets returns in some GCC countries. In Saudi Arabia, Kuwait and Bahrain, the negative oil price fluctuations have larger impact on the returns of stocks markets than positive oil price fluctuations. The results reveal also that the existence of political instability increases the sensitivity of stock markets returns on negative oil price shocks. In addition, the results of ESTR model do not reveal any asymmetrical relationship between the magnitude of oil price changes and stock markets returns in GCC region except Oman. A high level of oil price shocks has larger impact on Omani stock market returns than small oil price shocks.

Energy price implications for emerging market bond returns

This paper examines the impact of oil price innovations on emerging market sovereign total bond returns, as measured by the JP Morgan Emerging Market total return bond index, for portfolios of oil exporting and oil importing countries from 2007 to 2015. Globally emerging markets have benefited from investors’ desire for global diversification and search for higher yield returns. This recent wave of investor demand has provided benefits to both investment grade and noninvestment grade countries and has reduced reliance on International Finance Institutional sources. Bond market investors have shifted to shorter investment horizons, and an oil price shock may influence a country’s ability to access international markets for funding during adverse market conditions. Thus, oil price interaction with bond returns and the investor perception of oil price innovations on sovereign credit risk have the capacity to have profound impacts on national economies. This paper finds that oil prices have a statistically significant influence on portfolio total sovereign bond returns for globally focused oil exporters and importers. Exporter and importer total bond portfolio return responses to positive oil price shock conditions were similar, implying that sovereign governments’ bond portfolios are exposed to changes in investor risk perception, but not necessarily in terms of their oil importing and exporting status.

Oil price and inflation dynamics in the Gulf Cooperation Council countries

This paper employs the linear autoregressive distributed lag (ARDL) model, the asymmetric nonlinear ARDL model, and the Pooled Mean Group (PMG) method to examine the symmetric and asymmetric effects of oil price changes on inflation in the Gulf Cooperation Council (GCC) countries. Short-run and long-run asymmetries are introduced via positive and negative partial sum decompositions of oil price. The results suggest that the variables are cointegrated and that there is significant evidence of long-run asymmetry. This implies that rising and falling oil prices have different effects on inflation. In particular, while rising oil price has a significant positive effect on inflation in all the cases, falling oil price is either insignificant or has a negative effect on inflation. The PMG model indicates that only rising oil price has a positive significant effect on inflation. Moreover, the results suggest that positive oil price changes have a larger impact than the negative ones, that the effect of an oil price shock is larger in the long-run than in the short-run, and that there is incomplete pass-through effect of oil price on domestic inflation.

Heterogeneous risk spillovers from crude oil to regional natural gas markets: the role of the shale gas revolution

ABSTRACTThis paper investigates the heterogeneous risk spillovers from crude oil to regional natural gas markets against the background of the North American shale gas revolution. The market risks are measured by the upside and downside VaR. We first confirm the existence of risk spillovers between oil and gas markets by using Granger causality in risk. Then, we employ the MVMQ-CAViaR model to reveal the tail-dependence patterns and propose the performance test to highlight the accuracy of the model for the construction of VaR. Furthermore, we construct quantile impulse-response functions and identify asymmetric features in the magnitude, duration, and direction of response by gas markets to extreme negative and positive oil price shocks. Our results show that the revolution actually affects the risk spillovers from oil to gas markets and exhibits the time-varying property. And the heterogeneous risk-transmission mechanisms depend on the regional characteristics and specific market scenarios. Finally, policy implications are discussed.

Market inefficiencies associated with pricing oil stocks during shocks

The assumption that market efficiency informs the pricing of oil stocks is critical to understanding the co-movement between stock markets and oil markets. To test this assumption in relation to various types of real oil price changes, this article proposes a two-stage analysis method that starts with a quantile regression to identify oil shocks and develop interval-valued factor pricing models. These interval-based methods, relative to traditional point-based methods, can produce more efficient parameter estimations by providing more information. The results show that oil stocks tend to be overpriced following negative oil price shocks, which partially violates the efficient market hypothesis. Yet oil stocks are efficiently priced in response to moderate changes or positive oil price shocks, such that in most cases, the market remains efficient in pricing oil stocks.

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.