Oil price dynamics : analyses of macro economy & stock markets for ten countries

Abstract

In this paper, the aim of research is to investigate the effects of oil price upon economic growth and stock market returns in ten net oil-dependent countries. We apply four different modifications to crude oil price and use Structural Vector Autoregressive regressions to examine the relationships and effects of oil price dynamics. The present research starts by introducing the topic of oil price, the macroeconomic variables and the stock markets. Further, some previous studies on the subject are presented followed by a section where the chosen data set along with variables are defined. Finally, the characteristics and properties of the econometric model and the modifications are presented. In result, 8 out of 10 countries showed a significant relationship between the oil price and the GDP growth whilst only half of the countries showed significant relationship of oil price and stock market returns across the net oil-dependency. Key words: Oil prices, macro economy, stock market returns, Structural Vector Autoregression Model