Country-specific oil supply shocks and the global economy: A counterfactual analysis

Mohaddes, Kamiar; Pesaran, M. Hashem

doi:10.1016/j.eneco.2016.08.007

Cited by 66 publications

(32 citation statements)

References 33 publications

(11 reference statements)

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“…9. Mohaddes and Pesaran (2016) conclude the international oil price is weakly exogenous for Iran. They found out that negative shocks to the Iranian oil production are neutralized by increase in Saudi Arabia's oil production.…”

Section: Notesmentioning

confidence: 84%

Macroeconomic policies and the Iranian economy in the era of sanctions

Kandil

Mirzaie

2021

Middle East Development Journal

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This paper examines the impact of macroeconomic policies on the Iranian economy. The study covers the time between 1978-2017. The results illustrate the role of the money supply and government spending in supporting growth, although contributing to inflationary pressures in the long run, attesting to supply-side constraints. In the short-run, policies have aimed to provide support to the economy in the face of continued fluctuations with the oil price and spillovers from the geopolitical tensions attributed to sanctions. The exchange rate has played a key role in absorbing, but at times magnifying the adverse effects of these tensions. Continued deterioration of the fundamentals of the Iranian economy forced an official devaluation as the exchange rate proved to be misaligned with the fundamentals of the economy against the backdrop of the limited capacity of the Central Bank to continue to intervene to defend stability. In the meantime, a parallel exchange rate market has been flourishing to satisfy the market's needs as culminated in the spread between the market exchange rate and the official exchange rate. A wider spread between the parallel market rate and the official rate has signified overvaluation of the rial and proved to be a major source of inflationary expectations and pressures. Wider spread has demanded frequent interventions by the Central Bank to defend the official rate and ultimately has forced an official devaluation of the exchange rate, further increasing inflationary pressures with negative effects on the output supply given high dependency on imports for consumption and investment.

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Section: Notesmentioning

confidence: 84%

Macroeconomic policies and the Iranian economy in the era of sanctions

Kandil

Mirzaie

2021

Middle East Development Journal

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“…To the best of our knowledge, this is the first paper to consider all three global variables simultaneously, and we do so using a Global Vector Autoregression (GVAR) framework that allows us to investigate the aggregate effects of collective economic fluctuations at the domestic level, and vice versa. In this regard, Mohaddes and Pesaran (2016) and some earlier papers cited therein have shown the usefulness of the GVAR framework in identifying possibly very different impacts of country-specific fluctuations on global variables, and vice versa.…”

Section: Introductionmentioning

confidence: 97%

Financial liquidity, geopolitics, and oil prices

Abdel-Latif

El‐Gamal

2020

Energy Economics

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This paper aims simultaneously to study the global dynamic relationship of oil prices, financial liquidity, and geopolitical risk, on the one hand, and the economic performance of oil-exports-dependent economies on the other. Global and country-specific dynamics are studied together in a Global Vector Autoregression (GVAR) model that allows different lag structures for different variables in different countries. Global impulse response functions from the estimated model suggest that new waves of high oil prices are unlikely, despite the likely continuation of high global financial liquidity and heightened geopolitical risk, which had driven earlier episodes of very high oil prices. With oil remaining at modest to low prices by recent historical standards, we study the prospects for economic growth in oil-export-dependent economies through dramatic increases in domestic investment, as planned under Visions 2030 of some Arab countries, and conclude that, unfortunately, success is unlikely.

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“… Cashin et al (2014) apply a GVAR model for 38 countries/regions over the period 1979Q2–2011Q2 to show that the economic consequences of a supply-driven oil-price shock are very different from those of an oil-demand shock driven by global economic activity. Mohaddes and Pesaran (2016) develop a GVAR-oil model that integrates a model for the global oil market within that of the global economy to identify country-specific oil-supply shocks. Mohaddes and Pesaran (2017) , using a global VAR model for 27 countries/regions over the period 1979Q2 and 2013Q1, find that a fall in oil prices lowers interest rates and inflation in most countries and increases global real equity prices.…”

Section: Introductionmentioning

confidence: 99%

“… 2 Studies find linkages between the degree of financial development and energy consumption ( Sadorsky 2010 ; Shahbaz et al 2013 ). We include real equity prices as a regressor by following the practice of Mohaddes and Pesaran, 2016 , Mohaddes and Pesaran, 2017 , who find equity prices to be closely related with fossil fuel prices. …”

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confidence: 99%

Assessing the impact of COVID-19 on global fossil fuel consumption and CO2 emissions

2021

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The shock to the global economy from COVID-19 is predicted to be faster and more severe than the 2008 global financial crisis and even the Great Depression. We assess its impact on global fossil fuel consumption and CO 2 emissions over a two-year horizon. For this purpose we employ a global vector autoregressive (GVAR) model, which captures complex spatial-temporal interdependencies across countries due to the spread of the virus and associated international propagation of economic impact. The model makes use of a unique quarterly data set of coal, natural gas, and oil consumption, output and exchange rates, including global fossil fuel prices for 32 major CO 2 emitting countries. We produce forecasts of coal, natural gas and oil consumption, conditional on GDP growth scenarios based on alternative IMF World Economic Outlook forecasts that were made before and after the outbreak. We also simulate the effect of a relative price change in fossil fuels, due to carbon pricing in all countries in the sample, on consumption and output. Our results show that fossil fuel consumption and CO 2 emissions are expected to return to their pre-crisis levels, and even exceed them, within the two-year horizon despite the large reductions in the first quarter following the outbreak. Our forecasts anticipate more robust growth for emerging than for advanced economies. Recovery to the pre-crisis levels is expected even if another wave of pandemic occurs within a year. The results from our counterfactual carbon pricing scenario show that an increase in coal prices is expected to have a smaller impact on GDP than on fossil fuel consumption. Thus, the COVID-19 pandemic would not provide countries with a strong reason to delay climate change mitigation efforts.

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Country-specific oil supply shocks and the global economy: A counterfactual analysis

Cited by 66 publications

References 33 publications

Macroeconomic policies and the Iranian economy in the era of sanctions

Macroeconomic policies and the Iranian economy in the era of sanctions

Financial liquidity, geopolitics, and oil prices

Assessing the impact of COVID-19 on global fossil fuel consumption and CO2 emissions

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