The macroeconomic effects of increase and decrease in oil prices: evidences of asymmetric effects from India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anver Chittangadan Sadath ◽  
Rajesh Herolli Acharya
Keyword(s):  
Negative Impact ◽  
Wholesale Price ◽  
Oil Prices ◽  
Petroleum Products ◽  
Oil Price ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Real Gdp ◽  
Oil Price Shock ◽  
Price Shock

Purpose The purpose of this paper is to assess whether oil price shocks emanating from oil price increase and decrease have a different impact on the macroeconomic activity. Design/methodology/approach This study conducts the empirical analysis using structural vector auto-regressive model on Indian data for the period from 1996 to 2017. This paper uses four key macroeconomic variables, namely, real gross domestic product (GDP), the real rate of interest, real money supply, wholesale price index inflation and various linear and non-linear measures of oil price shock. Findings Empirical results confirm that oil price shock has a significant impact on various macroeconomic variables used in the study. Specifically, shocks emanating from a decline in oil price have a stronger positive impact on real GDP, whereas, a shock due to the rise in oil price has a weaker negative impact on real GDP. Impulse responses confirm that shocks due to a decline in oil prices are long-lasting compared to similar shocks due to a rise in oil prices. Therefore, this study concludes that the macroeconomic impact of oil price shock is asymmetric in India. Originality/value This paper adds the following new insights: First, this paper presents a distinct relationship between the growth rate of oil price and GDP during increasing and decreasing phases of oil price to drive home the case for this study. Second, India has adopted crucial administrative initiatives such as deregulation of the market for petroleum products and the promotion of renewable energy during the study period. Finally, previous studies have revealed specific behavioral and economic features of people in India with respect to the demand for petroleum products. In light of these factors, this paper based on Indian experience would be justified.

South Sudan may struggle to attract oil investment

2021 ◽  
Keyword(s):  
Foreign Direct Investment ◽  
Foreign Exchange ◽  
Direct Investment ◽  
Oil Price ◽  
Fiscal Year ◽  
Government Revenue ◽  
Content Type ◽  
Oil Price Shock ◽  
Price Shock ◽  
Almost All

Significance Crude oil is central to South Sudan’s economy, providing between 80% and 90% of government revenue and almost all export earnings. Last year’s oil price shock hit the economy hard and prompted two disbursements by the IMF under the Rapid Credit Facility (RCF) in November 2020 and April 2021. Impacts Net foreign direct investment (FDI) will turn positive in fiscal year (FY) 2020/21, following three years of outflows. The central bank’s weekly foreign exchange auctions will continue to reduce the gap between the official and parallel market rates. Following a contraction of around 4%, GDP is expected to grow modestly at 2-3% in FY 2021/22 and FY 2022/23.

scholarly journals Crude oil price variability and its impact on ethanol prices

2011 ◽  
Vol 57 (No. 8) ◽  
pp. 394-403 ◽  
Author(s):  
J. Pokrivčák ◽  
M. Rajčaniová
Keyword(s):  
Crude Oil ◽  
Impulse Response ◽  
Response Function ◽  
Impulse Response Function ◽  
Oil Prices ◽  
Oil Price ◽  
Biofuel Production ◽  
Oil Price Shock ◽  
Price Shock ◽  
The Impact

The world annual biofuel production has exceeded 100 billion litres in 2009. The development of the biofuel production is partly influenced by the government support programs and partly by the development of oil prices. The main purpose of this paper is to analyze the statistical relationship between ethanol, gasoline and crude oil prices. We aim to check the correlation among these variables and to analyze the strength and direction of a possible linear relationship among the variables. We are interested in analyzing how each variable is related to another, so we evaluate the inter-relationship among the variables in the Vector Autoregression (VAR) and the Impulse Response Function (IRF). In order to achieve our goal, we first collected weekly data for each variable from January, 2000 to October, 2009. The results provide evidence of the cointegration relationship between oil and gasoline prices, but no cointegration between ethanol, gasoline and ethanol, oil prices. As a result, we used a VAR model on first differences. After running the Impulse Response Function, we found out that the impact of the oil price shock on the other variables is considerable larger than vice versa. The largest impact of oil price shock was observed on the price of gasoline.  

Pressure will mount on Mexico's external sector

2016 ◽  
Keyword(s):  
Negative Impact ◽  
Oil Prices ◽  
Oil Price ◽  
Content Type ◽  
Credit Line ◽  
Growth Firms ◽  
Floating Exchange Rate ◽  
Fiscal Revenue ◽  
The Government ◽  
External Sector

Subject Mexico's external accounts. Significance The plunge in global oil prices represents a significant blow to the Mexican economy, particularly in terms of fiscal revenue. However, a negative impact is also showing in Mexico's external accounts. Moreover, manufacturing exports are contracting, partly due to problems in the automotive sector. Mexico's floating exchange rate is acting as an effective cushion, and its level of international reserves remains comfortable. Nonetheless, the growing external deficits may spark greater uncertainty about the economy's prospects. Impacts If market confidence deteriorates further, the government may activate the 65-billion-dollar Flexible Credit Line that it has with the IMF. The peso should rebound from the all-time nominal lows it has reached, but only after US growth firms up and the oil price stabilises. Despite the increasing external deficits, the government will not introduce protectionist measures and the opposition will not demand them.

scholarly journals DO OIL PRICE SHOCK, AND OTHER MACROECONOMIC VARIABLES AFFECT THE STOCK MARKET: A STUDY OF THE SAUDI STOCK MARKET

2020 ◽  
Vol 8 (3) ◽  
pp. 1234-1242 ◽  
Author(s):  
Naushad Alam
Keyword(s):  
Stock Market ◽  
Negative Relationship ◽  
Oil Price ◽  
Security Market ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Short Term ◽  
Macroeconomic Variables ◽  
Oil Price Shock ◽  
Price Shock

Purpose of the study: This work aims to find the type of relationship amongst the chosen variables, inflation (INF), short-term interest rate (SIR), money supply (M.S.) and crude oil price (COP) and oil price shocks represented by DUMMY respectively on the capital market of Saudi Arabia. It will also throw insight to policymaker to find factors which influence the capital market of Saudi Arabia and to take remedial measures to boost investment in the country. Research Methodology: The relationships amongst the Saudi security market, the oil price shock, and the selected macroeconomic variables as mentioned above are determined using the Johansen test of co-integration, the vector error correction model, and the Wald test. The research employs the time series data for a period of 2009to 2016, for the study. Findings: The results show a long-run equilibrium relationship between the Saudi stock market and the selected variables for the study. The study shows a positive association between the money supply and the stock market, but inflation, short-term interest rate, and crude oil price, the result indicates a negative relationship. Implications: The present study can have implications for the policymaker to take corrective measures for better performance of the stock market by controlling inflation and regulating the short-term interest rate.As the findings indicate that they have a negative relationship with TASI. This paper will also help the policymaker in identifying the real cause for the decline in the value of the stock price. A good performing stock market means better economic growth and overall economic development. To diversify the economy to have an alternative to the oil-driven economy to a more balanced economy by promoting other sectors like manufacturing and tourism. Novelty/Originality of this study: The literature review confirms that all work of oil price shock is related to its effect on the security market return. This work is different from the other study as it includes macroeconomic variables in the study, together with the oil price shocks. The study is unique from other studies as it is broader in approach, by including more variables than earlier studies which mostly included the oil price shocks and its impact on the stock market. There is no work done to investigate the joint effect of macroeconomic variables and oil price shocks on the Saudi stock market.

'Lifeline' loans to Angola will not spur reform

2015 ◽  
Keyword(s):  
Oil Field ◽  
Oil Price ◽  
Content Type ◽  
Energy Projects ◽  
Oil Price Shock ◽  
Price Shock ◽  
Oil Shock ◽  
Development Goals ◽  
The Government ◽  
Congo Brazzaville

Subject Outlook for Angola's relations with its creditors. Significance On July 31 the government entered into an agreement with Japan involving a 200-million-dollar concessional loan to support energy projects. It is the latest in a series of 'lifeline' deals concluded with donors and creditors in an attempt to cushion the economic reverberations of the oil price shock, particularly its implications for meeting debt repayments and development goals. Impacts The agreement signed with Congo-Brazzaville on July 31 to jointly exploit the Lianzi oil field could reduce border tensions. If protests increase, the government may escalate its civil society clampdown, eg through peremptory arrests of activists. New diamond projects will boost production, though recent 'blood diamond' allegations will raise reputation risks for investors. Increased diamond sales (up 35% in the first quarter year-on-year) will augment state revenues, but be insufficient to absorb the oil shock.

Oil prices, policy uncertainty and asymmetries in inflation expectations

2019 ◽  
Vol 46 (2) ◽  
pp. 324-334 ◽  
Author(s):  
Khandokar Istiak ◽  
Md Rafayet Alam
Keyword(s):  
Financial Crisis ◽  
Oil Price ◽  
Inflation Expectations ◽  
Policy Uncertainty ◽  
Content Type ◽  
Crisis Period ◽  
Asymmetric Effects ◽  
Output Stabilization ◽  
Oil Price Shock ◽  
Price Shock

PurposeThe purpose of this paper is to investigate the possible asymmetric response of inflation expectations to oil price and policy uncertainty shocks.Design/methodology/approachThe authors used the test of asymmetric impulse responses proposed by Kilian and Vigfusson (2011) to explore the issue of asymmetry.FindingsUnlike other studies that assume symmetric effects, this study finds asymmetric effects of oil price and policy uncertainty on inflation expectations for positive and negative shocks and for pre- and post-financial-crisis periods. In particular other things being same, a same magnitude oil price shock has greater effect on inflation expectations in post-crisis period than in pre-crisis period. Moreover, in post-crisis period a positive increasing oil price shock has greater effect on inflation expectations than a negative decreasing oil price shock.Practical implicationsThe paper concludes that FED’s greater focus on output stabilization since financial crisis has made inflation expectations less anchored and a sudden surge in oil price may quickly trigger inflation through inflation expectations.Originality/valueExploring the issue of the possible asymmetric effects of oil price and economic policy uncertainty on inflation expectations is a relatively new topic (as other studies only assumed symmetry and did not investigate the possible asymmetry in this regard).

Are the macroeconomic effects on oil price asymmetric? An asymmetric quantile regression approach

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huthaifa Alqaralleh
Keyword(s):  
Distribution Function ◽  
Design Methodology ◽  
Oil Prices ◽  
Oil Price ◽  
Economic Cycle ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Regression Approach ◽  
The Mean ◽  
Macroeconomic Effects

Purpose This paper aims to contribute to the clarification of whether the dependence and causality between oil and the macrofundamentals change across different quantiles of the distribution function. Design/methodology/approach Within the context of an asymmetric quantile approach, we drop the assumption that variables operate at the upper tails of the distribution in the way that they operate at the mean. Findings Our innovative approach indicates that the response of oil prices not only differs according to the underlying source of the variables shock but also differs across the quantiles. Originality/value Although a number of recent studies are closely related to our present research, our novel findings offer some important insights that foreshadow the empirical results. The current research addresses to answer the following questions, in sequence: (i) Is there any extreme value dependence between the crude oil and macroeconomic variables? If yes, (ii) is the dependence symmetric or asymmetric? Finally, (iii) can this dependence be driven by the phases of the economic cycle?

scholarly journals LONG-TERM OIL PRICE FORECASTS: A NEW PERSPECTIVE ON OIL AND THE MACROECONOMY

2011 ◽  
Vol 15 (S3) ◽  
pp. 396-415 ◽  
Author(s):  
J. Isaac Miller ◽  
Shawn Ni
Keyword(s):  
Negative Impact ◽  
Oil Prices ◽  
Oil Price ◽  
Market Model ◽  
Gdp Growth ◽  
Oil Market ◽  
Real Gdp ◽  
Asymmetric Responses ◽  
New Perspective

We examine how future real GDP growth relates to changes in the forecasted long-term average of discounted real oil prices and to changes in unanticipated fluctuations of real oil prices around the forecasts. Forecasts are conducted using a state-space oil market model, in which global real economic activity and real oil prices share a common stochastic trend. Changes in unanticipated fluctuations and changes in the forecasted long-term average of discounted real oil prices sum to real oil price changes. We find that these two components have distinctly different relationships with future real GDP growth. Positive and negative changes in the unanticipated fluctuations of real oil prices correlate with asymmetric responses of future real GDP growth. In comparison, changes in the forecasted long-term average are smaller in magnitude but are more influential on real GDP. Persistent upward revisions of forecasts in the 2000s had a substantial negative impact on real GDP growth, according to our estimates.

Market overreaction, firm-specific information and macroeconomic variables in US and Chinese markets during COVID-19

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ooi Kok Loang ◽  
Zamri Ahmad
Keyword(s):  
Unemployment Rate ◽  
Stock Return ◽  
Design Methodology ◽  
Specific Information ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Real Gdp ◽  
Chinese Markets ◽  
The Impact ◽  
Loser Portfolio

PurposeThis study examines the impact of firm-specific information and macroeconomic variables on market overreaction of US and Chinese winner and loser portfolio before and during COVID-19.Design/methodology/approachThe firm-specific information includes firm size, volume, volatility, return of asset (ROA), return of equity (ROE), earning per share (EPS) and quick ratio while the macroeconomic variables are export rate, import rate, real GDP, nominal GDP, FDI, IPI and unemployment rate. Besides, one-third of the top performance stocks are categorized as winner portfolio while one-third of lowest performance stocks are categorized as loser portfolio. This study uses AECR to indicate stock return and measure market overreaction. GAECR is used to determine contrarian profit. The data range of pre-COVID-19 is from 1-Jan-2015 to 31-Dec-2019 while the period of COVID-19 is from 1-Jan-2020 to 31-Dec-2020.FindingsIn pre-COVID-19, firm-specific information (volatility, ROA, ROE and EPS) and macroeconomic variables are found to be correlated to stock return in US and Chinese portfolios except Chinese winner portfolio. Nonetheless, the impact of firm-specific information has vanished and macroeconomic variables are significant to stock return in COVID-19. It shows that investors rely on the economic indicators to trade in turbulent period due to emergence of COVID-19 as a disruption in market. Furthermore, US and Chinese portfolios are overreacted during COVID-19. Chinese loser portfolio has higher tendency of overreaction than US loser portfolio while US winner portfolio has higher tendency of overreaction than Chinese winner portfolio.Originality/valueThe results of this study assists academician, practitioners and investors on understanding and create awareness to the existence of market overreaction and the determinants that can cause the phenomenon.

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