Macro-financial transmission of global oil shocks to BRIC countries — International financial (uncertainty) conditions matter

Zekeriya Yildirim and Hasan Guloglu

Energy, 2024, vol. 306, issue C

Abstract: A well-documented literature exists on the impact of global oil shocks on small open economies (SOEs). However, it still disregards the international financial (uncertainty) conditions. This study fills this gap by considering the conditions of global markets. We assess the macro-financial effects of global oil price shocks on oil-exporting and oil-importing emerging economies of BRIC by using the linear and non-linear SOE SVAR models. Documenting a novel amplification role of uncertain conditions, this study provides a clear message: international financial (uncertainty) conditions matter. We report three key results. First, negative oil price shocks tighten (loosen) financial conditions and induce a painful (beneficial) macroeconomic adjustment in BRIC oil exporters (importers). Second, two types of BRIC economies— oil-exporters and oil-importers— exhibit a divergent monetary policy response to common oil price shocks. Third, global financial (uncertainty) conditions amplify the macro-financial effects and make the monetary policy response to oil price shocks more aggressive.

Keywords: Global oil price shocks; International financial markets; Uncertainty; BRIC; Monetary policy responses; Time-varying threshold small open economy SVAR (search for similar items in EconPapers)
JEL-codes: C32 E58 F41 G15 Q37 Q43 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:306:y:2024:i:c:s0360544224020711

DOI: 10.1016/j.energy.2024.132297

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