Oil price fluctuations and economic growth: the case of MENA countries

Abstract

Purpose This paper aims to explore the extreme effect of crude oil price fluctuations and its volatility on the economic growth of Middle East and North Africa (MENA) countries. It also investigates the asymmetric and dynamic relationship between oil price and economic growth. Further, a separate analysis for each MENA oil-export and oil-import countries is conducted. Furthermore, it studies to what extent the quality of institutions will change the effect of oil price fluctuations on economic growth. Design/methodology/approach As the effect of oil price fluctuations is not the same over different business cycles or oil price levels, the paper uses a panel quantile regression approach with other linear models such as fixed effects, random effects and panel generalized method of moments. The panel quantile methodology is an extension of traditional linear models and it has the advantage of exploring the relationship over the different quantiles of the whole distribution. Findings The paper can summarize results as following: changes in oil price and its volatility have an opposite effect for each oil-export and oil-import countries; for the former, changes in oil prices have a positive impact but the volatility a negative effect. While for the latter, changes in oil prices have a negative effect but volatility a positive effect. Further, the impact of oil price changes and their uncertainty are different across different quantiles. Furthermore, there is evidence about the asymmetric effect of the oil price changes on economic growth. Finally, accounting for institutional quality led to a reduction in the impact of oil price changes on economic growth. Originality/value The study concludes more detailed results on the impact of oil prices on gross domestic product growth. Thus, it can be used as a decision-support tool for policymakers.

Oil Price Shocks and Stock Markets in Oil Importing Countries: Evidence from Egypt, Morocco, and Jordan

“…They found that positive changes and negative changes in oil prices affected the stock market returns in Jordan and Morocco, respectively. Consistently, Abdelsalam (2020) found the same results for 17 MENA countries including Egypt, Morocco, and Jordan. However, Al-Fayoumi (2009) examined the relationship between oil price and stock market returns of Turkey, Tunisia, and Jordan as oil-importing countries over the period (1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008).…”

Modeling and Mediating the Interaction between Oil Prices and Economic Sectors Advancement: The Case of Middle East

“…The asymmetric influence of oil price volatility on economic advancement particularly on sectorial level was the focus of some recent studies such as the Mexican Rodríguez-Benavides et al ( 2022); his results showed that the oil costs effect on sectorial level effected only the second level sectors not the primary sectors of economic, therefore, policy makers must mitigate the effect of uncertainty in oil market in order to avoid any economic instabilities. The same conclusion also was approved in MENA countries by (Abdelsalam, 2020;Ahmed, 2016) after examining the speculated effects of oil prices on MENA countries, the results of his study supported the proposed expectation for the negative impact of oil prices on economic growth. In middle east region such as Jordan (Al Nsour and Malkawi, 2019;Tahtamouni et al, 2017;Bash, 2015) and Lebanon (Ghalayini, 2011) approved the negative impact of oil prices on GDP, they found that as long as the oil importing costs decrease the GDP arise.…”

Oil prices volatility and economic performance during COVID-19 and financial crises of 2007–2008

“…used structural VAR model to assess the influence of coronavirus shocks on the energy futures markets, specifically on the S&P GS Indexes for crude oil and natural gas. The authors found that energy commodities respond to COVID-19 shocks in different ways over time, depending on fundamentals, behavioral, and psychological aspects ( Abdelsalam, 2020 ). investigate the extreme impact of oil price volatility on the economic performance in the MENA countries.…”