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Impact of World Oil Prices on an Energy Exporting Economy Including Monetary Policy

Author

Listed:
  • Alekhina, Victoriia

    (Asian Development Bank Institute)

  • Yoshino, Naoyuki

    (Asian Development Bank Institute)

Abstract

We investigate the interrelationship between the main macroeconomic indicators of an oil exporting country and world oil prices using a vector autoregressive approach. We focus on an oil exporter that is not a member of the Organization of the Petroleum Exporting Countries, and its oil revenues, which account for a significant proportion of the country’s total export and budget revenues. We explain the oil price transition mechanisms to this economy from the export side and through the fiscal channel, taking into account the monetary policy factor. The results suggest that oil price fluctuations have a significant impact on the oil exporting country’s real gross domestic product, consumer price index inflation rate, interest rate, and exchange rate. Moreover, to estimate monetary policy rule for this energy exporter, we test the Taylor equation and associated Taylor rule, including the oil prices gap, since the latter may have a significant impact on the key policy rate. The evidence suggests that the Taylor rule describes the post-financial crisis monetary policy of this economy relatively well. Finally, we discuss future research and lessons from this economy for monetary policy makers.

Suggested Citation

  • Alekhina, Victoriia & Yoshino, Naoyuki, 2018. "Impact of World Oil Prices on an Energy Exporting Economy Including Monetary Policy," ADBI Working Papers 828, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0828
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    oil prices; energy exporters; macro-economy; VAR model;
    All these keywords.

    JEL classification:

    • 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
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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