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Oil price uncertainty and real output growth: new evidence from selected oil-importing countries in the Middle East

Aktham Maghyereh, Basil Awartani () and Osama Sweidan ()
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Basil Awartani: University of Westminster

Empirical Economics, 2019, vol. 56, issue 5, No 7, 1621 pages

Abstract: Abstract This paper provides an empirical evidence on the influence of oil price uncertainty on the real economic activity in Jordan and Turkey during the period 1986:01–2014:12. To measure the effect of uncertainty, the paper combines a bivariate structural VAR with a GARCH-in-mean process that allows oil volatility to affect the growth of industrial production. Our results indicate that oil market uncertainty has a negative influence on the industrial output of Jordan and Turkey. For instance, the increase in one standard error of oil price uncertainty is found to be associated with a decline of 0.81 and 1.01% in the industrial production of Jordan and Turkey, respectively. Moreover, consistent with the recent empirical evidence, we find that output growth increases/decreases after a negative/positive oil price shock. These results imply that sound energy policies that mitigate the effect of oil market uncertainty may help in stabilizing output in both countries.

Keywords: Oil price volatility; Economic activity; Multivariate GARCH-in-mean VAR; Symmetric effect; Jordan; Turkey (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s00181-017-1402-7

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