Macroeconomics Effect of Oil Price Shocks

In an interconnected world, fluctuations in global oil prices significantly impact the economies of oil-exporting countries. This study investigates the effects of oil price shocks on the macroeconomic variables of major Organisation for Economic Co-operation and Development (OECD) oil-exporting countries from 1990 to 2022 using the panel vector autoregressive (PVAR) approach. The model comprises four variables to analyze the heterogeneous dynamic response to oil price shocks. The results indicate that oil price shocks negatively affect the economic growth rate and interest rates. The impact on inflation is positive but decreases after several periods. The shock's effect on the exchange rate is negative at first and slightly turns to positive thereafter.