Implications of Cheap Oil for Emerging Markets

Franziska Ohnsorge and Alain Kabundi ()

No 15296, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The COVID-19-triggered collapse in oil prices in March and April 2020 was the seventh, and by far the most severe, in a series of such collapses since 1970. This paper, first, compares this most recent collapse and its drivers with previous ones in an event study. It finds that it was associated with an exceptionally severe plunge in oil demand. Second, in a local projections model, this paper estimates the implications of demand- and supply-driven oil price collapses for growth in emerging markets and developing economies (EMDEs). The paper finds that steep oil price collapses were associated with significant and lasting output losses in energy-exporting EMDEs but no meaningful output gains in energy-importing EMDEs. These results are robust to multiple robustness checks.

Keywords: Oil price decline; Covid-19 pandemic; Macroeconomic implications; Supply factors; Demand factors; Local projections model (search for similar items in EconPapers)
JEL-codes: E32 F40 Q40 Q41 Q43 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-cwa, nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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