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Implications of oil prices shocks for the major emerging economies: A comparative analysis of BRICS

Muhammad Nasir (), Lutchmee Naidoo, Muhammad Shahbaz () and Nii Amoo

Energy Economics, 2018, vol. 76, issue C, 76-88

Abstract: This study analyses the implications of oil prices shocks for the BRICS economies. We employed a time-varying structural vector autoregressive (TV-SVA) framework in which the sources of time variation are the coefficients and variance-covariance matrix of the innovations. The quarter frequency data for the period of 1987QII–2017QII is used for the empirical analysis. The key findings suggest that there are substantial differences and asymmetries in the response of these economies to oil shocks. These differences were profound between, and even within, oil exporters and importers. It shows that between major oil exporters i.e. Russia and Brazil the former's economy is rather more intensively influenced by oil prices shocks. Between the two largest net oil importers i.e. India and China, comparatively, the Indian economy seems to be rather more vulnerable to oil prices shocks in terms of their adverse effects on GDP, inflation and balance of trade. The dependence of economies on oil and an increasing level of consumption continue to pose policy challenges for prices and economic stability. The analysis on South Africa also shows negative impacts of oil prices shocks, however, the effects are comparatively more time-variant than other BRICS members. While these asymmetries indicate significant differences in the structure of these economies they also indicate venues of cooperation and stronger trading relationships to overcome the adverse shocks and mutual development.

Keywords: Oil consumption; Trade balance; Inflation; GDP; Oil price shocks; BRICS; TVSVAR model (search for similar items in EconPapers)
JEL-codes: F14 F15 F43 E31 Q41 Q43 (search for similar items in EconPapers)
Date: 2018
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