FFA Working Papers 4:005 (2022)1008

Macroeconomic Responses of Emerging Market Economies to Oil Price Shocks: An Analysis by Region and Resource Profile

Sophio Togonidze, Evžen Kočenda

Prague University of Economics and Business,

Institute of Economic Studies, Charles University

We analyze the impact of oil price shocks on the macroeconomic fundamentals in a panel of emerging economies from three regions and with different resource endowments. The existing literature on emerging economies remains inconclusive on how regional factors and resource characteristics affect the response of macroeconomic variables against oil price shocks. We show that (i) exports in Europe and Central Asia are more oil-driven than East Asia and the Pacific, and that (ii) policy-makers in East Asia and the Pacific should be concerned with real exchange appreciation following a positive oil shock to mitigate loss in non-oil export market. Analysis by resource-endowment further reveal that in less-resource-intensive economies oil price shock cause large variation consumption, and a negative and persistent impact on real GDP. In mineral-exporting economies, real GDP and interest rates are largely driven by oil price shocks. The response of real GDP in mineralexporting economies is short-lived. In oil exporting economies, it is only real GDP that has a large variation in response to oil price shock. For policy making, our findings underscores the need for customized policy responses to oil price shocks depending on resourceendowments as we confirm that a ”uniform-policy cannot fit all” economies.

JEL classification: C11, E32, E37, F44

Received: April 25, 2022; Revised: April 25, 2022; Accepted: April 28, 2022; Published online: February 21, 2022  Show citation