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The effect of oil uncertainty shock on real GDP of 33 countries: a global VAR approach

Author

Listed:
  • Afees A. Salisu
  • Rangan Gupta
  • Abeeb Olaniran

Abstract

In this paper, we investigate the effect of oil price uncertainty shock on real Gross Domestic Product (GDP) of 33 developed and emerging economies using the Global Vector Autoregressive (VAR) framework that allows us to capture the transmission of global shocks while simultaneously accounting for distinct characteristics of individual countries. Utilizing quarterly data over the period of 1980Q1 to 2019Q2, we show that, in general, oil price uncertainty shock has a statistically significant negative impact on GDP for 28 out of the 33 countries, but with varying magnitude and persistence. Overall though, we find the adverse effect on real GDP to be relatively stronger for the developed group of countries than the emerging ones. Hence, our results suggest that policymakers must be ready to undertake expansionary policies (of varying order) in the wake of an oil price uncertainty shock to prevent deep recessions, except in the cases of Norway, Philippines and Saudi Arabia, for which output tends to increase in a statistically significant manner.

Suggested Citation

  • Afees A. Salisu & Rangan Gupta & Abeeb Olaniran, 2023. "The effect of oil uncertainty shock on real GDP of 33 countries: a global VAR approach," Applied Economics Letters, Taylor & Francis Journals, vol. 30(3), pages 269-274, February.
    • Handle: RePEc:taf:apeclt:v:30:y:2023:i:3:p:269-274
    DOI: 10.1080/13504851.2021.1983134
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    Cited by:

    1. Gupta, Rangan & Nielsen, Joshua & Pierdzioch, Christian, 2024. "Stock market bubbles and the realized volatility of oil price returns," Energy Economics, Elsevier, vol. 132(C).
    2. Afees A. Salisu & Abeeb O. Olaniran, 2026. "Energy market uncertainty and economic conditions at the global and U.S. State levels," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 50(1), pages 1-51, December.
    3. Xin Sheng & Rangan Gupta & Qiang Ji, 2023. "The Effects of Disaggregate Oil Shocks on the Aggregate Expected Skewness of the United States," Risks, MDPI, vol. 11(11), pages 1-9, October.
    4. Afees A. Salisu & Dinci J. Penzin & Xuan Vinh Vo, 2024. "Global economic contraction, climate change and the gold market volatility: A GARCH‐MIDAS approach," Australian Economic Papers, Wiley Blackwell, vol. 63(4), pages 712-728, December.
    5. Afees Adebare Salisu, 2024. "India and the Rest of the World: Analyses of International Monetary Policy Spillovers," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 27(3), pages 573-600, July.
    6. Rangan Gupta & Christian Pierdzioch, 2021. "Climate Risks and the Realized Volatility Oil and Gas Prices: Results of an Out-of-Sample Forecasting Experiment," Energies, MDPI, vol. 14(23), pages 1-18, December.
    7. Salisu, Afees A. & Adediran, Idris & Omoke, Philip C. & Tchankam, Jean Paul, 2023. "Gold and tail risks," Resources Policy, Elsevier, vol. 80(C).
    8. Rangan Gupta & Christian Pierdzioch, 2023. "Do U.S. economic conditions at the state level predict the realized volatility of oil-price returns? A quantile machine-learning approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-22, December.
    9. Abeeb Olaniran & Xin Sheng & Oguzhan Cepni & Rangan Gupta, 2025. "Climate Shocks and Unemployment Claims," Working Papers 202536, University of Pretoria, Department of Economics.
    10. Abeeb Olaniran & David Gabauer & Rangan Gupta & Onur Polat, 2025. "Predicting the Conditional Distribution of Risk Aversion The Role of Climate Risks in a Cross-Quantilogram Framework," Working Papers 202524, University of Pretoria, Department of Economics.
    11. Zhang, Tianding & Zeng, Song, 2023. "Dynamic comovement and extreme risk spillovers between international crude oil and China's non-ferrous metal futures market," Resources Policy, Elsevier, vol. 80(C).
    12. Salisu, Afees & Hammed, Yinka S., 2025. "International monetary policy spillovers between Japan and the Rest of the World: A GVAR Framework," MPRA Paper 123529, University Library of Munich, Germany.
    13. Salisu, Afees A. & Ogbonna, Ahamuefula E. & Vo, Xuan Vinh, 2023. "Oil tail risks and the realized variance of consumer prices in advanced economies," Resources Policy, Elsevier, vol. 83(C).
    14. Çepni, Oğuzhan & Gupta, Rangan & Pienaar, Daniel & Pierdzioch, Christian, 2022. "Forecasting the realized variance of oil-price returns using machine learning: Is there a role for U.S. state-level uncertainty?," Energy Economics, Elsevier, vol. 114(C).
    15. Gupta, Rangan & Pierdzioch, Christian & Salisu, Afees A., 2022. "Oil-price uncertainty and the U.K. unemployment rate: A forecasting experiment with random forests using 150 years of data," Resources Policy, Elsevier, vol. 77(C).
    16. Tan, Yan & Uprasen, Utai, 2023. "Asymmetric effects of oil price shocks on income inequality in ASEAN countries," Energy Economics, Elsevier, vol. 126(C).

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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