Energy Economics
Elham Gholampour; Teymour Mohammadi; Asghar Abolhasani hastiani; Mohsen Mehrara
Abstract
This paper primarily focuses on the global macroeconomic consequence, which are the result of country-specific oil supply shocks using the GVAR-Oil model estimated for 27 countries/regions over the 1979Q2-2019Q4 period. Not only does this approach include how shocks affect directly exposed countries ...
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This paper primarily focuses on the global macroeconomic consequence, which are the result of country-specific oil supply shocks using the GVAR-Oil model estimated for 27 countries/regions over the 1979Q2-2019Q4 period. Not only does this approach include how shocks affect directly exposed countries but it also indicates the indirect results of shocks thanks to secondary or tertiary channels. Given the importance of Saudi Arabia and Iran in the world’s oil supply, adopting this model facilitates the way in which oil supply shocks are examined in the country-specific context. Therefore, the results indicate different disruptions depending on which country is subject to the shock. In fact, this study shows that a negative shock to oil supply in Iran has relatively insignificant effects on the global economy compared with those of Saudi Arabia since it can be neutralized by the increase in Saudi Arabia oil production. A negative shock to the oil supply in Saudi Arabia, however, results in an increase in oil prices, which adversely affects GDP and financial market in general. In addition, this approach provides policymakers with more opportunities to cope with consequences, which are the result of Covid-19, sanctions, and war, for instance, in a wider range of countries as representatives of the global economy, and thus help them to make better strategic decisions.
