The Macroeconomic Impact of Oil Price Shocks
Date
2016
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Haverford College. Department of Economics
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Thesis
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Award
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eng
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Bi-College users only
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Abstract
This thesis studies the impact of oil price shocks on key macroeconomic indicators including GDP growth, inflation, exchange rate and the current account balance for both oil exporting and importing countries from 1999 to 2015. Structural Vector Autoegression model is first used to decompose the underlying causes of oil price shocks at each period. Then a Vector Autoregression model is used to analyze the responses of each macroeconomic indicator to different types of oil price shocks. This thesis has following key findings. First, countries respond to different types of oil price shocks very differently. Following an oil supply shock, oil exporters tend to benefit from further GDP growth while oil importers tend to experience a fall in GDP growth. In the case of an aggregate demand shock, all countries seem to benefit from an increase in GDP growth. Whereas following an oil market specific shock, most countries experience a fall in GDP growth. Second, among the oil importers, the more advanced economies tend to suffer less from an oil price shock than the developing economies. Third, oil exporters with lower crude oil reserve-to-production ratio tend to benefit less from an oil price shock.
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Nancy Yannan Li was a Bryn Mawr College student.