Unveiling asymmetric dynamics: Exploring the impact of oil price on economic growth and current account deficit: Evidence from G-7 countries

Binfeng Ma and Xiaofang Wang

Resources Policy, 2024, vol. 89, issue C

Abstract: In this research, the asymmetric dynamics that drive the influence of variations in oil prices on economic growth and Current Account Deficit (CAD) among the G7 nations are uncovered. Using sophisticated quantitative methodologies, we analyze the complicated connection patterns that arise in reaction to oil price variations. We show evidence that rises in the price of oil has significant negative effects on economic growth, and we also discover a positive association with CAD. The significant finding of the Quantile Granger causation Test is that the unidirectional causation from oil prices to economic growth and CAD is confirmed. These results highlight the essential role of oil price dynamics in defining the macroeconomic landscape in G7 nations and give valuable insights that may devise successful fiscal policies. These findings also emphasize the indispensable part that the movement of oil prices has in the global macroeconomic context. It is essential to diversify energy sources to reduce the volatility of oil prices. This study gives a more in-depth knowledge of the asymmetric interaction between oil prices, economic growth, and CAD, laying the groundwork for further research. It is recommended that policymakers give precedence to energy diversification and investments in other energy sources in order to address the economic vulnerabilities that are linked to changes in oil prices.

Keywords: Oil price; Economic growth; Current account deficit; Asymmetric dynamics; Quintile Granger causality test (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:89:y:2024:i:c:s0301420723011923

DOI: 10.1016/j.resourpol.2023.104481

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