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Macro-financial transmission of global oil shocks to BRIC countries — International financial (uncertainty) conditions matter

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  • Yildirim, Zekeriya
  • Guloglu, Hasan

Abstract

A well-documented literature exists on the impact of global oil shocks on small open economies (SOEs). However, it still disregards the international financial (uncertainty) conditions. This study fills this gap by considering the conditions of global markets. We assess the macro-financial effects of global oil price shocks on oil-exporting and oil-importing emerging economies of BRIC by using the linear and non-linear SOE SVAR models. Documenting a novel amplification role of uncertain conditions, this study provides a clear message: international financial (uncertainty) conditions matter. We report three key results. First, negative oil price shocks tighten (loosen) financial conditions and induce a painful (beneficial) macroeconomic adjustment in BRIC oil exporters (importers). Second, two types of BRIC economies— oil-exporters and oil-importers— exhibit a divergent monetary policy response to common oil price shocks. Third, global financial (uncertainty) conditions amplify the macro-financial effects and make the monetary policy response to oil price shocks more aggressive.

Suggested Citation

  • Yildirim, Zekeriya & Guloglu, Hasan, 2024. "Macro-financial transmission of global oil shocks to BRIC countries — International financial (uncertainty) conditions matter," Energy, Elsevier, vol. 306(C).
    • Handle: RePEc:eee:energy:v:306:y:2024:i:c:s0360544224020711
    DOI: 10.1016/j.energy.2024.132297
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    Keywords

    Global oil price shocks; International financial markets; Uncertainty; BRIC; Monetary policy responses; Time-varying threshold small open economy SVAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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