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Implications of Cheap Oil for Emerging Markets

Author

Listed:
  • Alain Kabundi
  • Franziska Ohnsorge

Abstract

The COVID-19-triggered collapse in oil prices in March and April 2020 was the seventh, and by far the most severe, in a series of such collapses since 1970. This paper, first, compares this most recent collapse and its drivers with previous ones in an event study. It finds that it was associated with an exceptionally severe plunge in oil demand. Second, in a local projections model, this paper estimates the implications of demand- and supply-driven oil price collapses for growth in emerging markets and developing economies (EMDEs). The paper finds that steep oil price collapses were associated with significant and lasting output losses in energy-exporting EMDEs but no meaningful output gains in energy-importing EMDEs. These results are robust to multiple robustness checks.

Suggested Citation

  • Alain Kabundi & Franziska Ohnsorge, 2020. "Implications of Cheap Oil for Emerging Markets," CAMA Working Papers 2020-83, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2020-83
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-01/83_2020_kabundi_ohnsorge.pdf
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    Cited by:

    1. Jongrim Ha & M. Ayhan Kose & Franziska Ohnsorge, 2021. "Inflation During the Pandemic: What Happened? What is Next?," Koç University-TUSIAD Economic Research Forum Working Papers 2108, Koc University-TUSIAD Economic Research Forum.
    2. Jongrim Ha & M. Ayhan Kose & Franziska Ohnsorge & Hakan Yilmazkuday, 2025. "What Explains Global Inflation," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 73(2), pages 522-555, June.
    3. Hao Xiong & Wen Shi & Shilin Xu & Huayu Shen, 2021. "Impact of COVID-19 on Corporate Liabilities in the Energy & Power Industry," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 2(1), pages 1-4.
    4. Selçuk Akçay, 2021. "Are Oil Prices and Remittance Outflows Asymmetric? Evidence From Saudi Arabia," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 1(1), pages 1-1.

    More about this item

    Keywords

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    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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