Importance of oil shocks and the GCC macroeconomy: A structural VAR analysis

Muhammad Ali Nasir, Ahmed Abdulsalam Al-Emadi, Muhammad Shahbaz, Shawkat Hammoudeh

Research output: Contribution to journalArticle

9 Citations (Scopus)

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. In terms 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.

Original languageEnglish
Pages (from-to)166-179
Number of pages14
JournalResources Policy
Volume61
Early online date21 Feb 2019
DOIs
Publication statusPublished - 1 Jun 2019
Externally publishedYes

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