A Crude Shock: Explaining the Impact of the 2014-16 Oil Price Decline Across Exporters

Francesco Grigoli (), Alexander Herman and Andrew Swiston

No 2017/160, IMF Working Papers from International Monetary Fund

Abstract: The decline in oil prices in 2014-16 was one of the sharpest in history, and put to test the resilience of oil exporters. We examine the degree to which economic fundamentals entering the oil price decline explain the impact on economic growth across oil exporting economies, and derive policy implications as to what factors help to mitigate the negative effects. We find that pre-existing fundamentals account for about half of the cross-country variation in the impact of the shock. Oil exporters that weathered the shock better tended to have a stronger fiscal position, higher foreign currency liquidity buffers, a more diversified export base, a history of price stability, and a more flexible exchange rate regime. Within this group of countries, the impact of the shock is not found to be related to the size of oil exports, or the share of oil in fiscal revenue or economic activity.

Keywords: WP; price; exchange rate; price decline; growth outturn; Event study; fundamentals; oil exporters; oil price; transmission of shocks; oil price shock; policy space; oil price decline; oil price fall; oil price futures curve; oil price drop; Oil prices; Oil; Exchange rate flexibility; Exchange rate arrangements; Oil exports; Global; summary statistics; oil exporter (search for similar items in EconPapers)
Pages: 26
Date: 2017-07-18
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Citations: View citations in EconPapers (9)

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