Macroeconomic Dynamics in the Oil Exporting Countries: A Panel VAR study

Abstract

This paper studies the macroeconomic dynamics in oil exporting countries using Panel VAR approach. This study in contrary with most other researches focuses on developing net oil exporters –instead of developed net importers- and in addition to investigating macroeconomic fluctuations, provides fresh insight into the impacts of oil shocks on macroeconomic variables. On the basis of Impulse Response and Variance Decompositions analysis in a system included economic output, money supply, price index and oil price, we found that: (1) oil shocks are not necessarily inflationary; (2) money is not neutral in these countries; (3) money is the main cause of macroeconomic fluctuations; (4) oil shocks significantly affect economic output and money supply; (5) though oil price is highly driven by its own shocks, domestic shocks, particularly output and money shocks, can sizably affect oil price in the world market.