Analyzing the association between crude oil price volatility and economic growth in OECD economies

This research has sought to determine how the crude oil price volatility (COPV) relates to economic growth (EG) using the case of the OECD countries between 2000 and 2022. Therefore, this article employs various panel data estimation strategies: random effect regression, fixed effect regression, dynamic panel data estimation, one-step system GMM and dynamic panel data estimation; two-step system GMM. The chosen time domain consists of oil-producing and consuming major countries within the OECD. The key findings of the study suggest that COPV has adverse effects on the growth of OECD economies. This would consequently mean that the knowledge of how volatility in crude oil prices (COPs) could affect very influential economic performance is of paramount importance and might bring out certain vital challenges that could be brought up by oil market volatility. The article ends with a few policy suggestions that may assist in mitigating the adverse impact of exogenous, unpredictable fluctuations in oil prices on the EG of the countries of the OECD. This research provides critical insights into the relationship between crude oil price volatility (COPV) and economic growth (EG) within OECD countries, offering significant contributions to macroeconomic theory and policy formulation. By employing robust panel data estimation techniques, including dynamic panel data analysis and system GMM, the study examines the adverse effects of COPV on the economic performance of both oil-exporting and oil-importing nations over a 23-year period. The findings are particularly relevant for policymakers in oil-dependent economies, where economic stability is more vulnerable to oil price fluctuations. The research challenges traditional economic models by highlighting the asymmetric and nuanced nature of oil price effects, emphasizing the need for tailored risk management strategies and macroeconomic policies to mitigate the unpredictable impacts of COPV on growth. The theoretical advancements made in understanding the complex interplay between oil prices, COPV, and economic growth extends the existing knowledge in macroeconomics, international trade, and econometrics. These insights can be leveraged to enhance economic resilience in the face of volatile global oil markets.