Oil price volatility and economic growth: Evidence from advanced economies using more than a century’s data

Abstract

In this paper we make use of a number of different panel data estimators, including fixed effects, biascorrected least squares dummy variables (LSDVC), generalised methods of moments (GMM), feasible generalised least squares (FGLS), and random coefficients (RC) to analyse the impact of real oil price volatility on the growth in real GDP per capita for 17 member countries of the Organisation for Economic Cooperation and Development (OECD), over a 144-year time period from 1870 to 2013. Our main findings can be summarised as follows: overall, oil price volatility has a negative and statistically significant impact on economic growth of OECD countries in our sample. In addition, when allowing for slope heterogeneity, oil producing countries are significantly negatively impacted by oil price uncertainty, most notably Norway and Canada.

Oil price uncertainty and movements in the US government bond risk premia

“…The theories of investment under uncertainty and real options predict that uncertainty about, for example, oil prices will induce optimizing firms to postpone investment decisions, thereby leading to a decline in aggregate output (Bernanke, 1983). Empirical evidence in favour of this line of reasoning for the economy of the United States (US) can be found in the works of Serletis (2010, 2011) (and also verified globally more recently by van Eyden et al, (2019)). Given that oil price uncertainty negatively affects macroeconomic variables (Bams et al, 2017), shows that oil market uncertainty also predicts valuation of stocks in the US.…”

The impact of oil price changes on selected macroeconomic indicators in Azerbaijan

“…Pioneering studies that mostly establish a negative relationship between oil prices and real economic activity include Burbidge and Harrison, 1984 , Darby, 1982 , Davis and Haltiwanger, 2001 , Gisser and Goodwin, 1986 , Hamilton, 1983 , Hooker, 1996 , Hooker, 2002 , and Rasche and Tatom, 1977 , Rasche and Tatom, 1981 . More recent papers reiterate this adverse effect on the gross domestic product (GDP), consumer prices, and unemployment ( Katircioglu et al (2015) ) and find a detrimental effect of oil price volatility ( van Eyden et al (2019) ). Sotoudeh and Worthington (2017) document the influence on net oil-consuming countries and net oil-producing countries.…”

Relationship between uncertainty in the oil and stock markets before and after the shale gas revolution: Evidence from the OVX, VIX, and VKOSPI volatility indices

“…Two consecutive oil shocks in the early and late 1970s resulted in many studies that investigate the effect of oil price changes on the economic or financial environment. A number of them investigate how oil shocks affect macroeconomic variables such as GDP (gross domestic product), inflation, exchange rates, and government expenditure ( [13], [14], [15], [16], [17], [18]). Moreover, a few studies examine the relationship between oil prices and exchange rates intensively.…”