Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no12.0295

The Asymmetric Effect of Oil Price Shocks on Economic Growth and Real Exchange Rate in Saudi Arabia  

BEN DHIAB, Lassad (Department of Finance, College of Business Administration, Northern Border University)
CHEBBI, Taha (Department of Marketing, College of Business Administration, Northern Border University)
ALIMI, Nabil (Department of Economics, Faculty of Economics and Management of Tunis, University Tunis El Manar)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.12, 2021 , pp. 295-303 More about this Journal
Abstract
The aim of this study is to analyze the effects of oil prices on economic growth and exchange rate in Saudi Arabia during the period 1980-2020. For this purpose, the linear and nonlinear ARDL models are estimated. The linear ARDL model shows that the oil price and economic growth are cointegrated. Moreover, the two variables have a significant positive association in the long run. However, the oil price has no significant impact on the exchange rate. When estimating the nonlinear ARDL model, it has been shown that oil price is only cointegrated with economic growth but not with the exchange rate. The estimation of nonlinear effects using the nonlinear ARDL model shows that economic growth is affected by both positive and negative oil shocks in the long run. However, the impact of positive shocks is higher than those of negative shocks. Moreover, results show that the short-run effects of positive and negative oil shocks are not statistically significant. Regarding the exchange rate, our results show that the effects of positive and negative oil shocks are not statistically significant. Consequently, this study concludes that the oil price has an asymmetric effect on economic growth in Saudi Arabia, but not on the exchange rate.
Keywords
Oil Price; Economic Growth; Exchange Rate; Nonlinear ARDL; Saudi Arabia;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Abidin, N. Z., Karim, Z. A., Shaari, M. S., & Laila, N. (2021). The effect of foreign direct investment on total factor productivity in selected ASEAN+ 3 Countries: New evidence using a panel ARDL study. The Journal of Asian Finance, Economics, and Business, 8(10), 109-117. https://doi.org/10.13106/jafeb.2021.vol8.no10.0109   DOI
2 Hoang, T. M. (2021). Asymmetric effects of oil price shock on stock markets in Vietnam: An empirical investigation based on SVAR model and NARDL model. The Journal of Asian Finance, Economics, and Business, 8(6), 553-565. https://doi.org/10.13106/jafeb.2021.vol8.no6.0553   DOI
3 Abdelsalam, M. A. M. (2020). Oil price fluctuations and economic growth: the case of MENA countries. Review of Economics and Political Science. In press. https://doi.org/10.1108/REPS12-2019-0162   DOI
4 Ng, S., & Perron, P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica, 69(6), 1519-1554. https://doi.org/10.1111/1468-0262.00256   DOI
5 Jung, Y. C., Das, A., & McFarlane, A. (2020). The asymmetric relationship between the oil price and the US-Canada exchange rate. The Quarterly Review of Economics and Finance, 76, 198-206. https://doi.org/10.1016/j.qref.2019.06.003   DOI
6 Olayungbo, D. O. (2021). Global oil price and food prices in food importing and oil-exporting developing countries: A panel ARDL analysis. Heliyon, 7(3), e06357. https://doi.org/10.1016/j.heliyon.2021.e06357   DOI
7 Benassy-Quere, A., Mignon, V., & Penot, A. (2007). China and the relationship between the oil price and the dollar. Energy Policy, 35(11), 5795-5805. https://doi.org/10.1016/j.enpol.2007.05.035   DOI
8 Henriques, I., & Sadorsky, P. (2011). The effect of oil price volatility on strategic investment. Energy Economics, 33(1), 79-87. https://doi.org/10.1016/j.eneco.2010.09.001   DOI
9 Herrera, A. M., Karaki, M. B., & Rangaraju, S. K. (2019). Oil price shocks and US economic activity. Energy Policy, 129, 89-99. https://gattonweb.uky.edu/faculty/herrera/documents/HKR_JEPO.pdf   DOI
10 Lee, B. J., Yang, C. W., & Huang, B. N. (2012). Oil price movements and stock markets revisited: A case of sector stock price indexes in the G-7 countries. Energy Economics, 34(5), 1284-1300. https://doi.org/10.1016/j.eneco.2012.06.004   DOI
11 Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616   DOI
12 Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modeling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. New York, NY: Springer.
13 Alqahtani, A., Klein, T., & Khalid, A. (2019). The impact of oil price uncertainty on GCC stock markets. Resources Policy, 64, 101526. https://doi.org/10.1016/j.resourpol.2019.101526   DOI
14 Huang, Y., & Feng, G. U. O. (2007). The role of oil price shocks on China's real exchange rate. China Economic Review, 18(4), 403-416. https://doi.org/10.1016/j.chieco.2006.02.003   DOI
15 Akinsola, M. O., & Odhiambo, N. M. (2020). The asymmetric effect of oil price on economic growth: A panel analysis of lowincome oil-importing countries. Energy Reports, 6, 1057-1066. https://doi.org/10.1016/j.egyr.2020.04.023   DOI
16 Al Samman, H., & Jamil, S. A. (2021). Does falling oil prices impact industrial companies in the Gulf Cooperation Council countries? The Journal of Asian Finance, Economics, and Business, 8(2), 89-97. https://doi.org/10.13106/jafeb.2021.vol8.no2.0089   DOI
17 Olomola, P. A. (2006). Oil price shock and aggregate economic activity in Nigeria. African Economic and Business Review, 4(2), 40-45. http://www.theaebr.org/Articles/V4N2Fa2007Bimola.pdf
18 Phan, D. H. B., Tran, V. T., & Nguyen, D. T. (2019). Crude oil price uncertainty and corporate investment: New global evidence. Energy Economics, 77, 54-65. https://doi.org/10.1016/j.eneco.2018.08.016   DOI
19 Ruankham, W., & Pongpruttikul, P. (2021). Feldstein-Horioka puzzle in Thailand and China: Evidence from the ARDL Bounds Testing. The Journal of Asian Finance, Economics, and Business, 8(9), 1-9. https://doi.org/10.13106/jafeb.2021.vol8.no9.0001   DOI
20 Aloui, C., Hkiri, B., Hammoudeh, S., & Shahbaz, M. (2018). A multiple and partial wavelet analysis of the oil price, inflation, exchange rate, and economic growth nexus in Saudi Arabia. Emerging Markets Finance and Trade, 54(4), 935-956. https://doi.org/10.1080/1540496X.2017.1423469   DOI
21 Baumeister, C., & Kilian, L. (2014). Do oil price increases cause higher food prices? Economic Policy, 29(80), 691-747. https://www.jstor.org/stable/24030050   DOI
22 Bayer, C., & Hanck, C. (2013). Combining non-cointegration tests. Journal of Time Series Analysis, 34(1), 83-95. https://doi.org/10.1111/j.1467-9892.2012.00814.x   DOI
23 Emami, K., & Adibpour, M. (2012). Oil income shocks and economic growth in Iran. Economic Modelling, 29(5), 1774-1779. https://doi.org/10.1016/j.econmod.2012.05.035   DOI
24 Kisswani, K. M., Harraf, A., & Kisswani, A. M. (2019). Revisiting the effects of oil prices on the exchange rate: Asymmetric evidence from the ASEAN-5 countries. Economic Change and Restructuring, 52(3), 279-300. https://doi.org/10.1007%2Fs10644-018-9229-6   DOI
25 Mohammed Suliman, T. H., & Abid, M. (2020). The impacts of oil price on exchange rates: Evidence from Saudi Arabia. Energy Exploration & Exploitation, 38(5), 2037-2058. https://doi.org/10.1177/0144598720930424   DOI
26 Mehta, A. M., Qamruzzaman, M., Serfraz, A., & Ali, A. (2021). The role of remittances in financial development: Evidence from nonlinear ARDL and asymmetric causality. The Journal of Asian Finance, Economics, and Business, 8(3), 139-154. https://doi.org/10.13106/jafeb.2021.vol8.no3.0139   DOI