Financial Liquidity, Geopolitics, and Oil Prices

55 Pages Posted: 5 Jan 2018

See all articles by Hany Abdel-Latif

Hany Abdel-Latif

Swansea University; Economic Research Forum; The Economic Society

Mahmoud El-Gamal

Rice University - Department of Economics

Date Written: November 15, 2017

Abstract

This paper aims simultaneously to study the global dynamic relationship of oil prices, financial liquidity, and geopolitical risk, on the one hand, and the economic performance of oil-dependent economies on the other. Global and country-specific dynamics are studied together in a Global Vector Autoregression (GVAR) model that allows different lag structures for different variables in different countries. Impulse response functions from the estimated model suggest that new waves of high oil prices are unlikely, despite the likely continuation of high global financial liquidity and heightened geopolitical risk, which had driven earlier episodes of very high oil prices. With oil remaining at modest to low prices by recent historical standards, we study the prospects for economic growth in oil-dependent economies through dramatic increases in domestic investment, as planned under Visions 2030 of a number of Arab economies, and conclude that success is unlikely.

Keywords: Geopolitics, Global Liquidity, Oil Prices, MENA Region, Arab Spring, Global VAR

JEL Classification: C32, E17, F44, F47, O53, Q43

Suggested Citation

Abdel-Latif, Hany and El-Gamal, Mahmoud A., Financial Liquidity, Geopolitics, and Oil Prices (November 15, 2017). Available at SSRN: https://ssrn.com/abstract=3095787 or http://dx.doi.org/10.2139/ssrn.3095787

Hany Abdel-Latif (Contact Author)

Swansea University ( email )

School of Management
Bay Campus
Swansea, SA1 8EN
United Kingdom

HOME PAGE: http://www.swansea.ac.uk/

Economic Research Forum ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

HOME PAGE: http://erf.org.eg

The Economic Society ( email )

School of Management
Swansea University
Swansea, Swansea SA1 8EN
United Kingdom

HOME PAGE: http://theeconomicsociety.org

Mahmoud A. El-Gamal

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States
713-737-6301 (Phone)
713-737-5879 (Fax)

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