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Oil price fluctuations and their impact on oil-exporting emerging economies

Emmanuel Agboola, Rosen Chowdhury Orcid Logo, Bo Yang Orcid Logo

Economic Modelling, Volume: 132, Start page: 106665

Swansea University Authors: Rosen Chowdhury Orcid Logo, Bo Yang Orcid Logo

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Abstract

How do oil price fluctuations affect economic activity and policy in the context of oil-exporting emerging economies? Past research suggests that the output responses to oil price innovations are asymmetric in nature but does not directly test the asymmetry in the government expenditure adjustments...

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Published in: Economic Modelling
ISSN: 0264-9993
Published: Elsevier BV 2024
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa65537
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Abstract: How do oil price fluctuations affect economic activity and policy in the context of oil-exporting emerging economies? Past research suggests that the output responses to oil price innovations are asymmetric in nature but does not directly test the asymmetry in the government expenditure adjustments triggered by the shock. Moreover, many studies quantifying these asymmetric responses are fraught with methodological concerns. This paper assesses the empirical relevance of such asymmetries by studying how output and government expenditure respond to oil price shocks. Our estimation, employing unbiased methodologies, allows us to be agnostic regarding asymmetries in the responses depending on the direction and size of the shock. Using data for a diverse group of emerging economies, we find substantial evidence for the presence of asymmetries. Country-specific factors and/or fiscal stabilization incentives are possible explanations for the asymmetric responses. We draw policy recommendations for understanding the growth process specific to resource-rich emerging economies.
Keywords: Asymmetries; Oil price shocks; Censored-regressor nonlinear models; Emerging economies
College: Faculty of Humanities and Social Sciences
Start Page: 106665