FEEM working papers "Note di lavoro"
2021.13
Date: 23/5/2021

Oil Price Shocks and Economic Growth in Oil-Exporting Countries


Authors:

Maryam Ahmadi (Fondazione Eni Enrico Mattei); Matteo Manera (University of Milan-Bicocca, Fondazione Eni Enrico Mattei)

JEL n.: C3, G11, Q41, Q43
Keywords: Oil Market, Output Growth, Macroeconomic Policy, Threshold SVAR

Abstract

The aim of this paper is to investigate how major net oil exporter economies react to oil price shocks. We contribute to the literature by considering, at the same time, the possible nonlinearity and asymmetry of this relationship with respect to sign, size and causes of the oil price shocks, as well as the state of the economy in which the shocks occur. We apply a Threshold Structural VAR approach, characterized by a separation of the observations into different regimes based on a threshold variable, to model time series non-linearities. We use the economic activity as the threshold variable, as it divides economic development in two regimes under which we expect the effects of oil price shocks to differ. First, We find that the effects of oil price shocks on oil exporting economies greatly depend on the underlying cause of the shocks as well as the state of the economy. Second, we find little evidence of asymmetric response of output to the sign of oil price shocks. Our main findings warn decision makers in the area of macroeconomic planning that, when making decisions based on the oil price, the underlying causes of its variations as well as the state of the economy in which the oil price shocks occur have to be considered.

***

Suggested citation: M. Ahmadi, M. Manera, (2021), 'Oil Price Shocks and Economic Growth in Oil-Exporting Countries', Nota di Lavoro 13.2021, Milano, Italy: Fondazione Eni Enrico Mattei

Download file
Download file

FEEM Newsletter & Update

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter & Update. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree