Importance of Oil Shocks and the GCC Macroeconomy: A Structural VAR Analysis

Posted: 2 May 2019

See all articles by Muhammad Ali Nasir

Muhammad Ali Nasir

Leeds Beckett University - Leeds Business School

Ahmed Abdulsalam Al-Emadi

Independent

Muhammad Shahbaz

Montpellier Business School- Energy and Sustainable Development

Shawkat M. Hammoudeh

Montpellier Business School; Drexel University - Lebow College of Business

Date Written: April 3, 2019

Abstract

This study is an endeavour to analyse the influence of oil price shocks on the macroeconomy of the Gulf Cooperation Council(GCC) member countries (Bahrain, Kuwait, KSA, Oman, Qatar and UAE). By employing a structural Vector auto-regression(SVAR) model for period 1980–2016, our key findings suggest that there are significant positive effects of oil price shocks on the GDP, inflation and trade balance of those countries. The findings, however, show substantial heterogeneities in the responses of the GCC members to oil shocks, which suggests the presence of idiosyncrasies in the underlying structure of their economies and differences in the degree to which these economies are dependent on oil revenues. Interms of inflation, there are also major differences in the intensity of the impact of oil shocks on the overall price, which implies that the GCC monetary policies might face a different genre of challenges to attain price stability in the face of those shocks. Our findings have profound policy implications in terms of diversifying the economies of the GCC countries and efforts to decrease the sole dependence on oil revenues.

Keywords: GCC, Natural Resources, Oil Price Shocks,Trade Balance, Inflation, GDP, SVAR Model

JEL Classification: F14, F15, F43, E31, Q41, Q43

Suggested Citation

Nasir, Muhammad Ali and Al-Emadi, Ahmed Abdulsalam and Shahbaz, Muhammad and Hammoudeh, Shawkat M., Importance of Oil Shocks and the GCC Macroeconomy: A Structural VAR Analysis (April 3, 2019). Resources Policy, Vol. 61,166-179 (2019). Available at SSRN: https://ssrn.com/abstract=3364963

Muhammad Ali Nasir (Contact Author)

Leeds Beckett University - Leeds Business School ( email )

Leeds Beckett University
University 9 Queen Square ,City Campus
Leeds, LS1 3HE
United Kingdom

Ahmed Abdulsalam Al-Emadi

Independent ( email )

No Address Available
United States

Muhammad Shahbaz

Montpellier Business School- Energy and Sustainable Development ( email )

Shawkat M. Hammoudeh

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Drexel University - Lebow College of Business ( email )

3141 Chestnut Street
Philadelphia, PA 19104
United States
2158956673 (Phone)
2158956975 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/HammoudehS/

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