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Oil price uncertainty and real output growth: new evidence from selected oil-importing countries in the Middle East

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  • Aktham I. Maghyereh

    (United Arab Emirates University)

  • Basil Awartani

    (University of Westminster)

  • Osama D. Sweidan

    (United Arab Emirates University)

Abstract

This paper provides an empirical evidence on the influence of oil price uncertainty on the real economic activity in Jordan and Turkey during the period 1986:01–2014:12. To measure the effect of uncertainty, the paper combines a bivariate structural VAR with a GARCH-in-mean process that allows oil volatility to affect the growth of industrial production. Our results indicate that oil market uncertainty has a negative influence on the industrial output of Jordan and Turkey. For instance, the increase in one standard error of oil price uncertainty is found to be associated with a decline of 0.81 and 1.01% in the industrial production of Jordan and Turkey, respectively. Moreover, consistent with the recent empirical evidence, we find that output growth increases/decreases after a negative/positive oil price shock. These results imply that sound energy policies that mitigate the effect of oil market uncertainty may help in stabilizing output in both countries.

Suggested Citation

  • Aktham I. Maghyereh & Basil Awartani & Osama D. Sweidan, 2019. "Oil price uncertainty and real output growth: new evidence from selected oil-importing countries in the Middle East," Empirical Economics, Springer, vol. 56(5), pages 1601-1621, May.
    • Handle: RePEc:spr:empeco:v:56:y:2019:i:5:d:10.1007_s00181-017-1402-7
    DOI: 10.1007/s00181-017-1402-7
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    More about this item

    Keywords

    Oil price volatility; Economic activity; Multivariate GARCH-in-mean VAR; Symmetric effect; Jordan; Turkey;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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

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