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On Asymmetric Causal Relationships In Petropolitics

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  • Feyza Balan

Abstract

The aim of this paper is to examine whether the First Law of Petropolitics denominated by Friedman in 2006 is valid for OPEC countries. To do this, this paper analyses the relationship between political risk and oil supply by applying the asymmetric panel causality test suggested by Hatemi-J (2011) to these countries for the period 1984-2014. The results show that the First Law of Petropolitics is valid for Angola, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and the UAE, given that positive oil supply shocks significantly lead to negative political stability shocks, and negative oil supply shocks significantly lead to positive shocks in political stability.

Suggested Citation

  • Feyza Balan, 2016. "On Asymmetric Causal Relationships In Petropolitics," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 61(209), pages 7-26, April - J.
    • Handle: RePEc:beo:journl:v:61:y:2016:i:209:p:7-26
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    References listed on IDEAS

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    1. Arezki, Rabah & Brückner, Markus, 2011. "Oil rents, corruption, and state stability: Evidence from panel data regressions," European Economic Review, Elsevier, vol. 55(7), pages 955-963.
    2. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    3. Romain Wacziarg, 2012. "The First Law of Petropolitics," Economica, London School of Economics and Political Science, vol. 79(316), pages 641-657, October.
    4. Hatemi-J, Abdulnasser, 2020. "Asymmetric Panel Causality Tests with an Application to the Impact of Fiscal Policy on Economic Performance in Scandinavia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 389-404.
    5. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 239-253.
    6. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    7. L. Vanessa Smith & Stephen Leybourne & Tae-Hwan Kim & Paul Newbold, 2004. "More powerful panel data unit root tests with an application to mean reversion in real exchange rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 147-170.
    8. Abdulnasser Hatemi-J, 2012. "Asymmetric causality tests with an application," Empirical Economics, Springer, vol. 43(1), pages 447-456, August.
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    Cited by:

    1. Su, Chi-Wei & Khan, Khalid & Tao, Ran & Nicoleta-Claudia, Moldovan, 2019. "Does geopolitical risk strengthen or depress oil prices and financial liquidity? Evidence from Saudi Arabia," Energy, Elsevier, vol. 187(C).
    2. Khan, Khalid & Su, Chi-Wei & Umar, Muhammad & Yue, Xiao-Guang, 2021. "Do crude oil price bubbles occur?," Resources Policy, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Political risk; oil prices; asymmetric panel causality test; OPEC;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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