Modeling oil price uncertainty effects on economic growth in Mexico: a sector-level analysis

Abstract

This paper analyzes the impact of international oil price uncertainty on the different economic sectors (primary, secondary, and tertiary) in Mexico in the period 1993:1–2020:4 through a bivariate structural vector autoregressive (VAR) model with a generalized autoregressive conditional heteroskedasticity (GARCH) in mean to capture the impact of oil volatility on economic growth at the sectoral level of economic activity. The results show that the uncertainty of the international price of oil has a differentiated effect on the different sectors of economic activity in Mexico since it does not influence the primary sector; it negatively impacts the secondary sector, and there is mixed evidence in the tertiary sector. Additionally, evidence is provided that both positive and negative shocks to the international oil price have asymmetric effects at the sectoral level in Mexico. The results highlight the need to implement public policies, at the country level, that help mitigate the effect of uncertainty in the oil market and promote economic stability at the sector level.

Perceived Consequences of Unpredictable Fuel Hike in Bangladesh

“…Jo (2014) studied the impact of fuel charge uncertainty on international actual economic activity. Ahmed and Wadud (2011) examined the effect of fuel charge uncertainty on Malaysia's macroeconomic things to do and its economic policy response (Rodríguez et al 2022).…”

“…The confinement induced via the SARS-Cov-2 health disaster (Yang et al 2021;Jinru et al 2021;Wen et al 2022) and, consequently, the incredible economic slowdown that used to be precipitated global (Chandio et al 2021;Elavarasan et al 2021;Irfan et al 2022), as nicely as the current armed conflict in Ukraine exhibit that the world economic system stays fairly prone and structured on fluctuations in the price of fuel and different main power sources.…”

“…Hence, they want to quantify the impact of fluctuations in fuel costs and their volatility on actual activity, no longer solely for developed economies but additionally for rising countries (Rodríguez et al 2022).…”