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Macroeconomic effects of oil price shocks on an emerging market economy

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  • Rodrigo da Silva Souza

    (Federal University of Latin American Integration)

  • Leonardo Bornacki Mattos

    (Federal University of Viçosa)

Abstract

This paper examines the macroeconomic effects of oil demand and supply shocks on an emerging market economy using a Bayesian vector autoregressive model combining zero and sign restrictions. The empirical analysis relies on a rich set of macroeconomic indicators mirroring the economic performance in Brazil. The effects on the Brazilian output of oil price changes driven by global demand shocks are much larger and more persistent than those driven by oil production. Oil price changes that are not related to changes in oil supply or global economic activity have a small impact on the Brazilian variables. The main policy implication of this study is that emerging market economies should identify correctly the source of oil price fluctuation for implementing the best economic policy.

Suggested Citation

  • Rodrigo da Silva Souza & Leonardo Bornacki Mattos, 2023. "Macroeconomic effects of oil price shocks on an emerging market economy," Economic Change and Restructuring, Springer, vol. 56(2), pages 803-824, April.
    • Handle: RePEc:kap:ecopln:v:56:y:2023:i:2:d:10.1007_s10644-022-09445-w
    DOI: 10.1007/s10644-022-09445-w
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    More about this item

    Keywords

    Global demand shocks; Oil supply shocks; Emerging market; Brazil; BVAR; Zero and sign restrictions;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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