Macroeconomic responses of emerging market economies to oil price shocks: An analysis by region and resource profile

Sophio Togonidze and Evžen Kočenda

Economic Systems, 2022, vol. 46, issue 3

Abstract: We analyze the impact of oil price shocks on the macroeconomic fundamentals in emerging economies in three regions that have different resource endowments. The existing literature on emerging economies remains inconclusive on how regional factors and resource characteristics affect the response of macroeconomic variables to oil price shocks. We show that (1) exports in Europe and Central Asia are driven by oil more than East Asia and the Pacific and that (2) policy makers in East Asia and the Pacific should be concerned about real exchange appreciation following a positive oil shock to mitigate losses in the non-oil export market. Analysis by resource endowment further reveals that, in less-resource-intensive economies, an oil price shock causes large variations in consumption and has a negative and persistent impact on the real gross domestic product (GDP). In mineral-exporting economies, real GDP and interest rates are driven largely by oil price shocks. The response of real GDP in mineral-exporting economies is short lived. In oil-exporting economies, only real GDP has a large variation in response to oil price shocks. Our findings highlight the need for customized policy responses to oil price shocks, depending on resource endowments, as we show that a “one size fits all" policy does not exist.

Keywords: Emerging market economies; Oil price shocks; Real GDP; Panel VAR (search for similar items in EconPapers)
JEL-codes: C11 E32 E37 F44 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Macroeconomic Responses of Emerging Market Economies to Oil Price Shocks: An Analysis by Region and Resource Profile (2022)
Working Paper: Macroeconomic Responses of Emerging Market Economies to Oil Price Shocks: Analysis by Region and Resource Profile (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:46:y:2022:i:3:s0939362522000504

DOI: 10.1016/j.ecosys.2022.100988

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