Oil price and inflation dynamics in the Gulf Cooperation Council countries (original) (raw)

Asymmetric Effect of Crude Oil Price Changes on Inflation in Selected East African Countries: Application of Panel Nonlinear Autoregressive Distributed Lag Model (PNARDL

Academia, 2023

Inflationary pressure that has been started increasing in 2000 in global economies were sharp increasing in East Africa developing countries. However, the role of asymmetric effects doesn't receive much attention in the East African context. This study examines the effects of crude oil price changes on inflation in selected East Africa's countries with special focus on asymmetric relationship of crude oil price changes and consumer price index where others are control variables. The long run and short run crude oil price changes are introduced into the oil price-inflation model through the positive and negative partial sum decompositions of oil price changes. The appropriate panel nonlinear autoregressive distributed lag model was selected and estimated with pooled mean group estimation techniques to capture effect of unequal magnitude oil price changes. The study finds that, the long run positive and negative oil price changes significantly affect inflation. The long run asymmetry is discovered by identifying the unequal or different coefficient values between positive and negative oil price with oil price positive exerting more effect on inflation than its counterpart oil price negative and revealed significant speed of adjustment which converges to equilibrium slowly in the long run. The result confirmed the large increase and small increase behaviors of positive and negative change of crude oil price.

Asymmetric Effect of Crude Oil Price Changes on Inflation in Selected East African Countries: Application of Panel Nonlinear Autoregressive Distributed Lag Model

Abrahim Osmael , 2023

Inflationary pressure that has been started increasing in 2000 in global economies were sharp increasing in East Africa developing countries. However, the role of asymmetric effects doesn't receive much attention in the East African context. This study examines the effects of crude oil price changes on inflation in selected East Africa's countries with special focus on asymmetric relationship of crude oil price changes and consumer price index where others are control variables. The long run and short run crude oil price changes are introduced into the oil price-inflation model through the positive and negative partial sum decompositions of oil price changes. The appropriate panel nonlinear autoregressive distributed lag model was selected and estimated with pooled mean group estimation techniques to capture effect of unequal magnitude oil price changes. The study finds that, the long run positive and negative oil price changes significantly affect inflation. The long run asymmetry is discovered by identifying the unequal or different coefficient values between positive and negative oil price with oil price positive exerting more effect on inflation than its counterpart oil price negative and revealed significant speed of adjustment which converges to equilibrium slowly in the long run. The result confirmed the large increase and small increase behaviors of positive and negative change of crude oil price.

Pass-Through of World Oil Prices to Inflation : A Time Series Analysis of Pakistan

2016

Inflation plays vibrant role in economic stability and is considered to be an integral component of sound macroeconomic policies. Consumer prices are very much linked with the oil prices. A change in oil prices is assumed to be passing through to other goods prices directly or indirectly. The main objective of this study is to investigate long-run passthrough of world oil prices to domestic inflation in Pakistan using monthly data from January 2000 to December 2014. The standard Augmented Dickey-Fuller (ADF) unit root test is applied to test the order of integration of selected variables. The Autoregressive Distributed Lag (ARDL) bounds testing approach is applied to investigate long-run passthrough of world oil prices to domestic inflation in Pakistan in the presence of control variable, i.e. exchange rate. The results of the study clearly explain that in the long-run international oil prices and exchange rate significantly affect the inflation rate in Pakistan. Furthermore, oil pr...

Oil Price and Macroeconomic Variables Nexus in GCC Countries

American Arab Journal for Business, Economics, and Finance, 2021

Is a country's oil resource a benefit or a curse? After the oil price shocks of 1973, the subject of oil prices and economic performance has taken on a great deal of significance. It is an essential component of the contemporary economy, and changes in it have an impact on every sector of the economy (Qianqin 2011). The intension of this paper is to assess how macroeconomic variables (Gross Domestic Product, Inflation, and Trade Openness) are affected by fluctuations in oil price in Gulf cooperation council countries using balanced panel data for six countries-Oman, Bahrain, United Arab Emirates, Saudi Arabia, and Kuwaitcovering the period from 1995 to 2020, and adopting panel vector autoregressive model (PVAR). The results showed that most of the variables examined, namely: Gross Domestic Product, and Trade Openness have strong positive correlation to oil prices. On the contrary it was found that inflation has significant and negative association with oil prices.

Asymmetric Impacts of Oil Price Shocks on Malaysian Economic Growth: Nonlinear Autoregressive Distributed Lag Approach

2019

This empirical study intends to examine the behavior of oil price on Malaysian economic growth whether nonlinearity implies. The dynamic models of Linear and Nonlinear Autoregressive Distribution Lags (ARDL and NARDL) are used to estimate the models. The study used annual data over the period of 1975 to 2015. The study used the real Malaysian spot oil price (Miri) as oil price unlike. The results from linear model revealed that oil price positively increase economic growth both in the short-run and the long-run. To achieve our objective, the NARDL estimator was used to detect the impact of positive and negetive changes in oil price. The results reveal that there is nonlinear relation among the variables in the long-run relationship as the evidence of cointegration was found. Increases in oil price boosts economic growth positively while a decrease in oil price is not as indicate insignificant. The error correction term confirms the results as indicate negative, significant and less ...

International Journal of Energy Economics and Policy International and Macroeconomic Determinants of Oil Price: Evidence from Gulf Cooperation Council Countries

2018

This study investigates the long-and short-run relationships between oil prices and stock market returns, exchange rates, gold prices, and linear and non-linear output, for the six Gulf Cooperation Council (GCC) countries. The study performs a panel and time-series cointegration and causality analysis based on monthly data from 2005 to 2015. The results indicate co-movement among these variables in the long run. The causality test shows a one-way relationship between oil prices and gross domestic product (GDP), and a two-way relationship between stock returns and oil prices. For robustness, the sample was divided into two sub-periods: Before and after the 2007/2008 global financial crisis. A long-run relationship was found among the variables, but there was no short-run relationship between the variables and oil prices before the crisis. Oil shocks had a significant impact on gold returns and exchange rate growth, while the GDP growth rate affected oil prices. The individual countri...

A nonlinear autoregressive distributed lag analysis on the macroeconomic effect of global oil price in the Philippines

International Social Science Journal, 2023

Studies have pointed out that oil price volatility influenced economic output and growth among developing and net oilimporting countries. More than a quarter of the Philippines' energy demand depends on crude oil, and 99% of the crude oil demand is imported mainly from the Middle East. This study was conducted to determine if there is a nonlinear or asymmetric output response to oil price movements and examine which economic sector in the Philippines is the most vulnerable to oil shocks. This contributes to the literature for a case of developing, oil importing, inflation targeting and postoil industry deregulated economy. A nonlinear autoregressive distributive lag model was applied to observe quarterly data from 1998:Q1 to 2019:Q4 of the relevant economic variables. Results revealed an asymmetric effect of non-oil variables on sectoral performance. World oil prices affect economic sector outputs symmetrically or linearly. The service sector is found to be the most vulnerable sector to oil price shocks. The absence of asymmetry can be attributed to increased competition in the Philippines' domestic oil industry brought about by oil market deregulation. Improving the energy mix and reducing oil intensity is vital to offset any oil price shock transmission to an oil-importing economy like the Philippines.

The impact of oil price shocks on inflation: Do asymmetries matter?

2022

Using cointegration approach and Augmented Phillips Curve framework, this study examines the effects of changes in the global oil prices on the inflation rate for five CEE countries between 1994 and 2018. Our research indicates the existence of cointegration for Czechia, Poland and Slovakia. We find a positive relationship between changes of oil prices and the inflation rate in Poland in the long run. Additionally, it seems that the changes in oil prices impact the inflation rate in the long run for Czechia, Hungary and Poland. In a non-linear model framework cointegration is found in Czechia, Hungary, Poland and Slovenia. Our findings suggest that changes in oil prices significantly affect the inflation rate in Czechia, Hungary and Poland in the long-run and in all countries in the short-run. More importantly, we demonstrate that the short-and long-run asymmetries play a significant role in explaining the dynamics of the inflation rate.

Macroeconomic impacts of oil price shocks on inflation and real exchange rate: Evidence from selected MENA countries

2016

In this paper, we attempt to analyze, during the period spanning from January 2000 to July 2015, the impact of oil price shocks on inflation and the real exchange rate in a six of oil importers and exporters MENA countries: Tunisia, Morocco, Algeria, Bahrain, Saudi Arabia and Iran (MENA-6) using a Structural VAR model. The impulse response functions reveal that, in the long run, oil price fluctuations have the major impact on real exchange rate of the oil-importing countries (Tunisia and Morocco) while the impact on inflation is smaller and absorbed by the rigidity of subsidized products prices. The variance decomposition results also assert that oil price shocks do not explain notably the variation in the two considered variables in Algeria and Iran. We further identify an impact on the two variables that is both statistically significant and economically large in the rest of countries.

Oil price and inflation in Algeria: A nonlinear ARDL approach

The Quarterly Review of Economics and Finance, 2019

This study examined the relationship between oil price changes and inflation rate in Algeria from 1970-2014. The study method that able to capture for asymmetries in the relationship between oil price and inflation known as nonlinear autoregressive distributed lags (NARDL). The estimated model revealed the existence of nonlinear effect of oil price on inflation. Specifically, we found a significant relation between oil price increases and inflation rate, whereas, a significant relation between oil price reduction and the inflation was absent.