Oil price fluctuations and economic growth: The case of MENA countries

Abdelsalam, Mamdouh Abdelmoula Mohamed A icle Oil p ice luc ua ions and economic g ow h: The case o MENA coun ies Re iew o Economics and Poli ical Science (REPS) P o ided in Coope a ion wi h: Cai o Uni e si y, Cai o Sugges ed Ci a ion: Abdelsalam, Mamdouh Abdelmoula Mohamed (2023) : Oil p ice luc ua ions and economic g ow h: The case o MENA coun ies, Re iew o Economics and Poli ical Science (REPS), ISSN 2631-3561, Eme ald, Bingley, Vol. 8, Iss. 5, pp. 353-379, h ps://doi.o g/10.1108/REPS-12-2019-0162 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/316087 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. 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I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ Oil p ice fluc ua ions and economic g ow h: he case o MENA coun ies Mamdouh Abdelmoula Mohamed Abdelsalam Depa men o Economics, Minufiya Uni e si y, Shebin El-Kom, Egyp Abs ac Pu pose –This pape aims o explo e he ex eme e ec o c ude oil p ice fluc ua ions and i s ola ili y on he economic g ow h o Middle Eas and No h A ica (MENA) coun ies. I also in es iga es he asymme ic and dynamic ela ionship be ween oil p ice and economic g ow h. Fu he , a sepa a e analysis o each MENA oil-expo and oil-impo coun ies is conduc ed. Fu he mo e, i s udies o wha ex en he quali y o ins i u ions will change he e ec o oil p ice fluc ua ions on economic g ow h. Design/me hodology/app oach –As he e ec o oil p ice fluc ua ions is no he same o e di e en business cycles o oil p ice le els, he pape uses a panel quan ile eg ession app oach wi h o he linea models such as fixed e ec s, andom e ec s and panel gene alized me hod o momen s. The panel quan ile me hodology is an ex ension o adi ional linea models and i has he ad an age o explo ing he ela ionship o e he di e en quan iles o he whole dis ibu ion. Findings –The pape can summa ize esul s as ollowing: changes in oil p ice and i s ola ili y ha e an opposi e e ec o each oil-expo and oil-impo coun ies; o he o me , changes in oil p ices ha e a posi i e impac bu he ola ili y a nega i e e ec . While o he la e , changes in oil p ices ha e a nega i e e ec bu ola ili y a posi i e e ec . Fu he , he impac o oil p ice changes and hei unce ain y a e di e en ac oss di e en quan iles. Fu he mo e, he e is e idence abou he asymme ic e ec o he oil p ice changes on economic g ow h. Finally, accoun ing o ins i u ional quali y led o a educ ion in he impac o oil p ice changes on economic g ow h. O iginali y/ alue –The s udy concludes mo e de ailed esul s on he impac o oil p ices on g oss domes ic p oduc g ow h. Thus, i can be used as a decision-suppo ool o policymake s. Keywo ds Economic g ow h, C ude oil p ice, Asymme ic e ec , Ex eme e ec , Panel quan ile eg ession Pape ype Resea ch pape 1. In oduc ion Ene gy plays he mos c i ical ole in he global economy. Despi e he inc easing deba e a ound he ole o al e na e enewable sou ces o ene gy such as wa e , sola and nuclea powe , oil s ill has a cen al ole o a as po ion o he wo ld’s coun ies. Hence, oil p ice shocks migh ha e conside able mac oeconomic consequences o bo h impo ing and expo ing coun ies. As o he o me ca ego y, oil is a majo de e minan o p oduc ion cos and o he la e , i is he p ima y sou ce o go e nmen e enue. Fu he , fluc ua ions in oil © Mamdouh Abdelmoula Mohamed Abdelsalam. Published in Re iew o Economics and Poli ical Science. Published by Eme ald Publishing Limi ed. This a icle is published unde he C ea i e Commons A ibu ion (CC BY 4.0) licence. Anyone may ep oduce, dis ibu e, ansla e and c ea e de i a i e wo ks o his a icle ( o bo h comme cial and non-comme cial pu poses), subjec o ull a ibu ion o he o iginal publica ion and au ho s. The ull e ms o his licence maybe seen a h p:// c ea i ecommons.o g/licences/by/4.0/legalcode JEL classifica ion –E32, Q43, C3 Oil p ice fluc ua ions and economic g ow h 353 Recei ed 21 Decembe 2019 Re ised 7 Sep embe 2020 26 Oc obe 2020 Accep ed 27 Oc obe 2020 Re iew o Economics and Poli ical Science Vol. 8 No. 5, 2023 pp. 353-379 Eme ald Publishing Limi ed e-ISSN: 2631-3561 p-ISSN: 2356-9980 DOI 10.1108/REPS-12-2019-0162 The cu en issue and ull ex a chi e o his jou nal is a ailable on Eme ald Insigh a : h ps://www.eme ald.com/insigh /2631-3561.h m p ices a ec p oduc ion cos s, hea ing bills and anspo a ion cos s. This gene a es unce ain y abou he u u e o he wo ld economy. This may also encou age in es o s o delay hei p oducing decisions and ealloca e labo and capi al om in ensi e pe oleum sec o s o non-in ensi e pe oleum sec o s (Sill, 2007). I is a gued ha oil p ice fluc ua ions ha e caused ins abili y o many mac oeconomic agg ega es in bo h oil-expo e s and impo e s coun ies (B inin e al., 2016). Consequen ly, because o his double impo ance o oil, i has been a gued ha i s p ice is highly ola ile han ha o any o he commodi y and i is almos unp edic able (Dehn, 2001). Howe e , he e ec o changes in he oil p ice is di e en o expo ing and impo ing coun ies. Expo ing coun ies massi ely depend on oil e enue. Then, a ise in oil p ices means inc easing he amoun o money a ailable o unding de elopmen p ojec s. The e o e, mone a y and fiscal policies unc ion is conside ably a ec ed by oil p ice fluc ua ions (Saddiqui e al.,2018). Howe e , he ad e se e ec makes he financial and eal agg ega es mo e unce ain due o he oil p ice ola ili y, pa icula ly in he case o impe ec capi al ma ke s (Hausmann and Rigobon, 2003). On he con a y, when he oil p ice is alling, go e nmen s canno immedia ely cu hei expendi u es and hen ace a massi e budge defici . As changes in oil p ices ha e a conside able e ec on mac oeconomic pe o mance in bo h expo ing and impo ing coun ies, analyzing his e ec and p edic ing o wha ex en g oss domes ic p oduc (GDP) in di e en coun ies is sensi i e o hese a ia ions a e c ucial Howe e , he dependence be ween oil p ice and economic g ow h is no he same o e di e en business cycles o oil p ice le els (Kilian and Vig usson, 2011;Das e al.,2018). The e o e, his s udy explo es he ex eme dependence be ween oil p ice fluc ua ions and economic g ow h in Middle Eas and No h A ica (MENA) coun ies using quan ile eg ession (Q.R.) in addi ion o he o he ou linea models. To ou knowledge, he e a e no s udies ha explo ed he ex eme e ec o he oil p ices on he economic g ow h o MENA coun ies. Q.R.’s app oach was p esen ed by Koenke and Basse (1978). I a ge s he assessmen o he unde lying ela ionship based on each quan ile (Bau , 2013). Unlike he o dina y leas squa es (OLS) and o he adi ional models, which assess he e ec o he explana o y a iable on he dependen a iable on a e age. The Q.R. me hodology is an ex ension o adi ional linea models and i has he ad an age o explo ing he whole ela ionship abou he impac o oil p ice changes on economic g ow h. Fu he , oil p ice changes a e cha ac e ized by hea y ails and sha p peaks. As quan ile eg ession is obus o skewness, ku osis and he e oscedas ici y, Q.R. can be used o o e come hese phenomena (Koenke , 2004;Chuang e al., 2009;Lin, 2013;Mensi e al.,2014). The s udy aims a explo ing how economic g ow h is a ec ed by he fluc ua ions and he ola ili y o c ude oil p ices, as well as he asymme y o c ude oil p ice changes in he MENA egion. In addi ion, i in es iga es how augmen ing he quali y o ins i u ions will a ec he p e ious ela ionship. Thus, he pape ies o answe he ollowing ou ques ions: wha he expec ed ex eme e ec o he fluc ua ions in c ude oil p ices on di e en MENA coun ies? How do he changes in oil p ice and ola ili y o oil p ice impac he MENA economies? To wha ex en should changes in oil p ice and oil p ice ola ili y be aken in o conside a ion when es ima ing o o ecas ing he economic g ow h o MENA coun ies? (4) Does he exis ence o mo e qualified and e ec i e ins i u ions a ec he ela ionship be ween oil p ice fluc ua ions and GDP g ow h? This pape con ibu es o p e ious s udies in di e en aspec s. Fi s , i explo es he ex eme impac o bo h oil p ice and unce ain y o oil p ice on he eal p oduc ; o ou knowledge, no p e ious s udy conside ed his poin be o e. Second, i explo es o wha ex en he e ec o oil p ices is asymme ic. The analysis o his pape is used as a decision- REPS 8,5 354 suppo ool o policymake s as i a emp s o in es iga e o wha ex en oil p ices and oil p ices ola ili y should be aken in o conside a ion when calcula ing and p edic ing economic g ow h. All ou linea models gi e obus analysis such as ha : changes in oil p ice fluc ua ions ha e a significan posi i e impac on economic g ow h while he ola ili y o oil p ice has an insignifican posi i e e ec . In addi ion, he e is e idence abou he asymme ic e ec o oil p ice changes on economic g ow h. Fu he , Q.R. emphasizes he impo ance o analyzing he ex eme e ec o oil p ice changes and unce ain y o oil p ice on economic g ow h as he e ec o hose a iables is mo e significan in uppe quan iles han middle o lowe ones. Fu he mo e, he quali y o ins i u ions has a significan posi i e e ec on GDP g ow h. Also, augmen ing he quali y o ins i u ions in he analysis esul ed in lowe ing he impac o c ude oil changes on economic g ow h, and he e ec o he ola ili y becomes insignifican in all models. Mo eo e , a sepa a e analysis o each MENA oil-expo coun y and MENA oil-impo coun ies is conduc ed and esul s show ha o oil-expo coun ies, changes in oil p ices ha e a significan posi i e impac bu he ola ili y has a nega i e e ec . Whe eas o oil impo coun ies, changes in oil p ices ha e a significan nega i e e ec bu ola ili y a posi i e significan e ec . This pape is s uc u ed as ollows. Sec ion 2 highligh s he ela i e exis ing li e a u e. Sec ion 3 illus a es he me hodology and empi ical analysis. Sec ion 4 p esen s he da a and empi ical esul s. Finally, in Sec ion 5 he conclusion and policy ecommenda ions a e p o ided. 2. Li e a u e e iew The ela ionship be ween oil p ice and economic g ow h has a ac ed many esea che s a e he pionee ing wo k o Hamil on (1983), who concludes ha he e is a nega i e e ec o oil p ice on he eal p oduc . In his ins ance, i is a gued ha oil p ice fluc ua ions ha e a conside able impac on indi iduals’wel a e o e he globe (Mgbame e al., 2015). Howe e , o he wo ks claim ha he ac ions o economic policies can abso b he e ec o oil p ice shocks on he eal p oduc (Vespignani e al., 2019;Ge shon e al.,2019). Fu he , Odhiambo (2020) e iews he li e a u e abou he e ec o oil p ice fluc ua ions on economic g ow h and he s a es ha he e ec a ies o di e en coun ies o di e en samples. The e is a con inuous deba e in he li e a u e abou he di ec ion o oil p ice e ec on economic g ow h. Whe eas some s udies a gue ha o expo ing coun ies, oil p ice inc eases lead o enhancing he le el o income and hen consequen ly bo h in es men and consump ion incomes g ow, which means highe le els o GDP g ow h; indeed, highe oil p ices lead o highe ea nings, which imply highe incomes in oil-expo ing-na ions (Akpan,2009;Foudeh,2017;Jahangi and Du al, 2018;Dabachi e al.,2020). Howe e , some empi ical s udies conclude ha he e is a nega i e e ec o oil p ice changes on GDP g ow h, pa icula ly in impo ing coun ies whe e he oil p ice is conside ed one o he mos c i ical ac o s o p oduc ion (A ou i and Nguyen, 2010;Filis e al.,2011;Mu shed and Tanha, 2020; Rahman and Majumde ,2020). Acco ding o his iew, a ise in wo ld oil p ices lowe s incomes o oil-impo ing coun ies. In his ega d, his educ ion in income depends on he deg ee o oil p ice elas ici y and he pe sis en change in he oil p ice (Ghalayini, 2011). Fu he , cen al banks migh adop con adic o y policies o lessen he domes ic p ice inc eases and his also b ings mo e es ic ions on he eal p oduc ion side. Papape ou (2001) and Miguel e al. (2003) ound a nega i e e ec o changes in oil p ices on GDP g ow h in G eece and Spain, espec i ely. Bouzid (2012) explo ed he Tunisian case and concluded ha a 10% highe inc ease in he global oil p ice causes a 3.4% decline in GDP g ow h. The ola ili y o oil p ices is also gi en conside able a en ion in he li e a u e. Okonju (2009) a gued ha oil p ices ha e highe ola ili y mo e han any o he p oduc s, which b ings undesi ables nega i e impac s on he eal p oduc side. Amany El-Anshasy e al. (2017) Oil p ice fluc ua ions and economic g ow h 355 conclude ha he ola ili y o oil e enue has a significan nega i e impac on GDP g ow h. Howe e , his e ec becomes less wi h he exis ence o ma u e ins i u ions as a mo e qualified fiscal egime. Van Eyden e al. (2019) ound a significan nega i e e ec on oil p ice ola ili y on GDP g ow h. Howe e , o he s udies confi med a posi i e impac on oil p ice ola ili y on GDP g ow h such as Bjo nland (2000) o No way economy and Akinlo and Tolulope Apanisile (2010) o 20 Sub-Saha an A ican coun ies. In addi ion, Ca alcan i e al. (2015) explo e he e ec o ola ili y and le el o he commodi y o ade e ms on GDP and hey conclude ha ola ili y is he main de e minan o he “ esou ce cu se.”Some s udies ound he e ec o oil p ice ola ili y can be mode a ed; o example, Ja e e al. (2018) ound ha he financial ins i u ions can decline he possible impac s o oil p ice ola ili y on some oil-p oducing coun ies. The asymme ic e ec o oil p ice on economic g ow h, whe he posi i e and nega i e oil p ice shocks ha e di e en impac s is ano he impo an opic o ecen li e a u e. The likely asymme ic e ec o oil p ice could be jus ified using h ee jus ifica ions: unce ain y, sec o al e ec s and coun e infla iona y mone a y ac ions (Kilian and Vig usson, 2011; Raheem,2017;Akinsola and Nicholas, 2020). Fo ins ance, Hamil on (2008) a gues ha oil p ice shocks migh push cus ome s in in ensi e ene gy sec o s o educe hei demands while o he sec o s which do no in ensi ely depend on ene gy migh be mo e cos ly o pay he cos o shi ing o labo and capi al inpu s ac oss sec o s due o aining cos s and o he mobili y cos s. S udies such as (Hamil on, 2003) conclude ha posi i e changes in wo ld oil p ices ha e a s onge e ec on economic pe o mance han nega i e ones. Jiménez- Rod íguez and Sanchez (2005) find ising in he oil p ice has mo e e ec on GDP g ow h han i s all in he selec ed The O ganisa ion o Economic Co-ope a ion and De elopmen (OECD) coun ies. Simila ly, Maalel and Mahmood (2018) find oil p ice shocks ha e an asymme ic impac on The Gul Coope a ion Council (GCC) economies. Al hough he main body o he li e a u e conside ed he case o de eloped economies, o he wo ks explo e he case o eme ging and de eloping coun ies. Fo ins ance, Anashasy e al. (2005) find a significan associa ion be ween oil p ice fluc ua ions and some economic agg ega es o Venezuela such as GDP, go e nmen e enues, go e nmen consump ion and in es men . Fa zanegan and Ma kwa d (2009) s udied he e ec o I an; Gba u e al. (2017) o Libe ia; Kousa e al. (2019) o Pakis an and Wida jono e al. (2020) o Indonesia. O he s udies such as Saban e al. (2019) compa ed di e en coun ies by explo ing he e ec o each coun y indi idually. Rega ding he MENA coun ies; Meh a a and Oskui (2007) p o ide e idence ha oil p ice fluc ua ions a e he p ima y sou ce o ins abili y o he mac oeconomic agg ega es in Saudi A abis. Be umen e al. (2010) conclude ha he impac o changes in oil p ice on economic g ow h is significan o some MENA coun ies while i is insignifican o o he s. Selim and Zaki (2014) find ha ins i u ional quali y is a leading cause o esou ce cu se in A abian coun ies. Cashin e al. (2016) used a global ec o au o eg ession (GVAR) model o es ima e he expec ed e ec s o mac oeconomic shocks in he main economies (US, Eu ope and China) on he MENA economies. They conclude ha shocks in he Chinese economy ha e a conside able influence on MENA coun ies. Mahmood and Zamil (2019) conclude fluc ua ions in oil p ices ha e a conside able e ec on Saudi A abia GDP ia he e ec on he budge defici . Simila esul s a e concluded o GCC coun ies by Voh a (2017) and o Bah ain by Abou Elseoud and K eishan (2020). 3. Model and me hodology The pape aims a examining he impac o changes in oil p ices and hei ola ili ies on he GDP o he MENA coun ies. Fu he , i explo es how he inclusion o ins i u ional quali y can a ec his ela ionship. The s udy uses he base model o Mankiw e al. (1992), gi en REPS 8,5 356 ha i allows augmen ing o he a iables such as he human capi al and ins i u ional quali y inside he adi ional classic model o Solow (1956). The model can be o mula ed as ollows: Yi ¼A0H b i GFC a i ALD d i (1) Whe e, Yi ep esen s he eal GDP g ow h o coun y i in he yea ;A0 ep esen s a scaling coe ficien ; and Hi ;GFCi ;and ALDi embody human capi al, physical capi al and land, espec i ely. The abo e equa ion ep esen s a Cobb-Douglas p oduc ion unc ion, which can be ans o med in o a log-linea equa ion. Wi h augmen ing o he a iables can, equa ion (1) can be ew i en as ollows: Yi ¼ b 0þCOP þVCOP þD þ b ln Hi ðÞ þ a ln GFCi ðÞ þ d ln ALDi ðÞ þXi þ « i (2) In mo e de ails can be w i en as ollows: Yi ¼ b 0þ%COP þ VCOP þ w AsDum þ b ln Hi ðÞ þ a ln GFCi ðÞ þ d ln ALDi ðÞ þ#Xi þ « i (3) Whe e, Yi is he g ow h in he eal domes ic p oduc (GDP); COP is he change in C ude oil p ices; VCOP is he ola ili y o c ude oil p ices; and AsDum ep esen s he dummy a iable ha cap u es he asymme y in he unde lying ela ion (i.e. whe he he changes in oil p ices a e posi i e o nega i e). The seconda y en ollmen pe cen age (SSEi Þand popula ion g ow h (PGi Þa e used o app oxima e he human capi al. Whe eas he alue o a eal in es men in o de app oxima e he physical capi al (GFCi Þ,A ablelandinhec a es(ALDi Þ. In addi ion, Xi is he included con ol a iables, which include he ini ial ILGDPi (ini ial GDP) o con ol o he likely condi ional con e gence, ERDi ep esen s he exchange a e de ia ion om he long- un exchange a e le el. Fu he , ne expo s o GDP (EPGi Þis used o examine he ex en o which eal ou pu g ow h is a ec ed by ade openness. Fu he mo e, OED is a dummy a iable which akes 1 o oil expo coun ies and 0 o o he impo coun ies and finally, INSi is used o accoun o he ins i u ion’s quali y index. In he case o he dynamic panel app oach, Xi also includes he lag o he dependen a iable (Yi 1). To be in ol ed in he ongoing deba e a ound he e ec o oil p ice unce ain y on di e en economic ac i i ies, we will use an app oxima ion o he a iabili y o c ude oil p ices. The condi ional a iance o oil p ice shocks is calcula ed by using a gene alized au o eg essi e condi ional he e oskedas ici y (GARCH) model which is based on mon hly- da a o he oil p ice. Then, he annual condi ional ola ili y is cap u ed by aking he a e age o he 12-mon h ola ili y. The e ec o oil p ice changes, he ola ili y o oil p ice and he asymme ic e ec o oil p ice on economic g ow h a e explo ed based on he specifica ion o equa ion (3). The coe ficien s o he equa ion (3) a e es ima ed using ou di e en linea app oaches: Pooled OLS, Fixed e ec es ima ion, Random e ec es ima ion and gene alized me hod o momen s (GMM). Fu he , o accoun o he whole dis ibu ion o he ela ionship, we also use he panel quan ile app oach. Oil p ice fluc ua ions and economic g ow h 357 Rega ding linea models, pooled OLS does no accoun o he e ogenei y be ween he c oss-sec ions in he model, while he fixed-e ec app oach and he andom e ec app oach conside he e ogenei y be ween c oss-sec ions. Howe e , all he p e ious h ee app oaches igno e he endogenei y p oblem when adding he lag o he dependen a iable. The sys em o he GMM me hod o e comes he likely endogenei y p oblem ha comes om augmen ing he lag o he dependen a iable inside he explana o y a iable. The sys em GMM me hod depends on adding lags o independen a iables as ins umen s. The es ima ion based on GMM has he ad an ages ha i gi es a consis en es ima ion o coe ficien s wi h an asymp o ically no mal dis ibu ion (Ziliak, 1997). The sys em GMM is widely used and is hea ily ecommended in he g ow h li e a u e. Bond e al. (2001) and Hauk and Waczia g (2009) s a e ha he GMM app oach is p e e ed o g ow h models o ge consis en and e ficien coe ficien s. Q.R. is ini ially inno a ed by Koenke and Basse (1978), and i ac s as he gene al o m o O dina y Leas Squa es (OLS); i p o ides mo e p ecise es ima es o he condi ional dis ibu ion. Q.R. app oach assumes ha he alue o he e o e m is condi ional on he included explana o y a iables a h quan ile equal o 0. Thus, he Q.R. o y as a dependen a iable and x as an independen a iable can be ep esen ed in he ollowing o m: Qyjx ðÞ ¼in bjFyjxb ðÞ  no ¼x0 b ðÞ (4) Whe e Qyjx ðÞ deno es he condi ional quan ile o he dependen a iable y, 0 < <1 and b ðÞ is he deg ee o e ec o x on y in he h quan ile which can be es ima ed as: ^ b ðÞ ¼a gmin b ðÞ X n i¼1 yix0 b ðÞ  (5) I « iis he andom e o e m, hus he loss unc ion o he quan ile eg ession can be w i en as ollows: « i ðÞ ¼ « i I « i<0 ðÞ½ (6) Whe e I(.) deno es he indica o unc ion and « i ðÞ deno es he check unc ion which weighs in an asymme ic way he nega i e and posi i e alues. To check o he assump ion o symme y, we use Newey and Powell (1987) es . I he dis ibu ion o Y based on X is symme ic, hen: b ðÞ þ b 1 ðÞ 2¼ b 1 2  (7) Thus, we can use he Wald es on he quan ile p ocess o e alua e he p e ious es ic ion. I we assume we ha e an odd numbe , K, o a se o es ima ed pa ame e s which o de ed k, hen he middle alue which kþ1 ðÞ =2 should be 0.5. Thus, he unde lying unc ion is symme ic a ound 0.5, and he assumed null hypo hesis is as ollows: u j ðÞ þ u kj1 ðÞ 2¼ u 1=2 ðÞ o j ¼1;...;K1 2(8) REPS 8,5 358 The Wald es is designed wi h he null hypo hesis o he symme ic e ec , and i ollows x 2 K1 ðÞ =2. Indeed, e using he null hypo hesis o Newey and Powell (1987) es means e using he assump ion o symme ic alues o he ela ionship o e di e en quan iles. Rega ding he gene a ing o oil p ice ola ili y, as i is men ioned be o e, i will be cap u ed based on he GARCH model. The ini ial o m o GARCH was in oduced by Bolle sle in 1986. In he con ex o he p e ious model, he mean equa ion will be modeled as a unc ion in i s lags. In addi ion, he condi ional a iance is a unc ion in he lag o squa ed esiduals and he lag o he condi ional a iance. I we assume ha he condi ional a iance is h and he squa ed e o s is « 2 , hen we can exp ess he GARCH(1,1) ep esen a ion as ollows: h ¼ l 0þ l 1 « 2 1þ l 2h 1(9) The coe ficien l 2measu es he pe sis ence inside he condi ional a iance equa ion which implies ha when l 2is close o 0, he pe sis ence is lowe whe eas he pe sis ence is highe when l 2close o one. Fu he , he a iance should be s ic ly posi i e, and he coe ficien s mus no be nega i e; l 00; l 10; l 20. Fu he mo e, he s a iona i y condi ion should be alid o he condi ional ola ili y equa ion; l 1þ l 2<1 ðÞ . 4. Da a, desc ip i e analysis and esul s 4.1 Da a The s udy uses annual da a o a panel o 17 MENA coun ies, which include: Alge ia, Bah ain, Egyp , Is ael, Jo dan, Kuwai , Lebanon, Libya, Mo occo, Oman, Qa a , Saudi A abia, Sudan, Tunisia, Tu key, Uni ed A ab Emi a es and Yemen. The sample span co e s he pe iod (1970–2018) o cap u e he su ge in oil p ices in he 1970s. The da a se includes he g ow h in he Real G oss Domes ic P oduc (cons an 2010 USD), C ude oil p ice, he seconda y school en ollmen pe cen age, he popula ion g ow h pe cen age, g oss fixed capi al o ma ion (cons an 2010 US$), a able land in hec a es, he exchange a e de ia ion om he long- un exchange a e le el calcula ed as he de ia ion om he long- un end which es ima ed by “Hod ick-P esco Fil e me hod,”ne expo s o GDP ( he expo s o goods and se ices minus impo s o goods and se ices as a pe cen age o GDP). The ins i u ion quali y index embodies he a e age o he sub-indices such as go e nmen s abili y, socioeconomic condi ions, in es men p ofile, in e nal conflic , ex e nal conflic , co up ion, mili a y in e en ion in poli ics, eligious ensions, law and o de en o cemen , e hnic ensions, democ a ic accoun abili y and bu eauc acy quali y. The da a o he a iables a e cap u ed om he wo ld bank da abase. Fu he , he da a o he c ude oil p ice is ep esen ed by he Wes Texas In e media e (WTI) c ude oil spo p ices, which a e collec ed om he In e na ional Ene gy Agency. Finally, da a abou ins i u ion quali y a e cap u ed om “Poli ical Risk Se ices G oup da abases.”All eg ession a iables a e implemen ed wi h logs o he a iables. 4.2 Desc ip i e analysis Figu e A1 depic s he de elopmen o he index o c ude oil p ice. As shown in he figu e, he oil p ice is highly ola ile du ing he pe iod o he s udy. Thus, he e was a significan inc ease in oil p ices s a ing om 1973 due o he poli ical p essu e and wa in he MENA egion. Howe e , wi h he 1980s and he economic slowdown in many de eloped coun ies, he oil demand d opped again. The p ice ended o inc ease om he beginning o he 2000s Oil p ice fluc ua ions and economic g ow h 359 un il he las global c isis in 2008. Ano he episode o oil p ice inc eases s a ed a e he eco e y o he financial c isis un il s a ing o all in 2014. Table A1 displays he desc ip i e s a is ics o he included a iables in he panel o m. Fo mo e de ails, analysis o each oil-expo and oil-impo is going o be sepa a ed. Table A2 shows he co ela ion ma ix o MENA expo ing coun ies. As shown in he able, he e is a posi i e co ela ion be ween GDP g ow h on one side and c ude oil p ice changes, ins i u ional quali y, Seconda y school en olmen pe cen age and popula ion g ow h on he o he side. In con as , he co ela ion be ween GDP g ow h and oil p ice ola ili y is nega i e. Figu e A2 shows he e olu ion o c ude oil p ices and GDP g ow h o he MENA oil- expo ing coun ies. I could be obse ed ha he e is a posi i e associa ion be ween bo h a iables. Howe e , he linkage be ween bo h a iables was s onge o mos oil-expo ing coun ies a he beginning o he sample: hen, i has been weakened in he pas 10 yea s. This could be explained by he economic di e sifica ion s a egy ha has been applied in many oil-expo ing coun ies such as Saudi A abia and Emi a es. On he o he hand, he ela ion be ween oil p ice ola ili y and GDP g ow h o MENA oil-expo ing coun ies is nega i e o long pe iods and many coun ies a e depic ed in Figu e A3. Table A3 shows he co ela ion ma ix o he MENA oil-impo ing coun ies. I can be obse ed ha he GDP g ow h is nega i ely co ela ed wi h c ude oil p ice changes and popula ion g ow h. While i is posi i ely co ela ed wi h he ola ili y o c ude oil p ice, he ins i u ion quali y and pe cen age numbe o seconda y schooling. The e olu ion o bo h c ude oil p ices and GDP g ow h a es o oil-impo ing na ions in he MENA egion is p esen ed in Figu e A4, whe e i can be obse ed ha a nega i e associa ion be ween he wo a iables. In addi ion, Figu e A5 depic s he e olu ion o oil ola ili y and GDP g ow h in he oil-impo ing coun ies in he MENA egions, whe e i can be obse ed i is sligh ly posi i e o some coun ies. 4.3 Resul s To check o s a iona i y o he included a iables, The Phillip Pe on (PP) es and he Augmen ed Dickey-Fulle (ADF) es s a e applied. Table A4 depic s he esul s o hese uni oo es s. As shown in he able, he p obabili ies o he wo used es s indica e ha we should ejec he null hypo hesis o he uni oo o all he used a iables. Table A5 e eals he esul s o he GARCH model. I shows ha in he mean equa ion bo h he fi s leg and he second lag a e significan . In he a iance equa ion, bo h he squa ed o p e ious esidual and lag o he GARCH a e significan . Also, he summa ion o he las wo coe ficien s is less han one, which is a equi ed assump ion o he s a iona i y o he GARCH model. Figu e A6 plo s he ola ili y o oil p ices o e he pe iod unde s udy. Table A6 shows he es ima es using he pooled OLS, fixed e ec , andom e ec and he sys em GMM, espec i ely. Acco ding o he esul s o he pooled OLS model, changes in oil p ices ha e a significan posi i e e ec on ou pu g ow h whe eas ola ili y o oil p ice has a posi i e e ec bu insignifican . In addi ion, he dummy a iable o he asymme ic e ec o oil p ice changes is significan and posi i e. Fu he , capi al o ma ion pe cen age has a significan and posi i e e ec , popula ion g ow h has a nega i e and significan e ec and he dummy a iable o oil-expo ing coun ies has a significan posi i e e ec . Rega ding he esul s o he fixed e ec me hod, Table A6 shows changes in oil p ices ha e a significan posi i e e ec whe eas he ola ili y o oil p ice has an insignifican posi i e e ec . Fu he , he e is e idence ha he e ec o oil p ice changes on economic g ow h is asymme ic and he popula ion g ow h has a nega i e significan e ec . Howe e , he exchange a e de ia ion does no ha e a significan e ec on ou pu g ow h. Fo he REPS 8,5 360 Kao, C. (1999), “Spu ious eg ession and esidual-based es s o coin eg a ion in panel da a”,Jou nal o Econome ics, Vol. 90 No. 1, pp. 1-44, doi: 10.1016/S0304-4076(98)00023. Lee, K., Lee, B. and Ra i, R. (2001), “Mone a y policy, oil p ice shocks, and he Japanese economy”, Japan and he Wo ld Economy, Vol. 13 No. 3, pp. 321-349. Le in, A., Lin, C.F. and Chu, C.S.J. (2002), “Uni oo es s in panel da a: asymp o ic and fini e sample p ope ies”,Jou nal o Econome ics, Vol. 108 No. 1, pp. 1-24, a ailable a : h ps://doi.o g/ 10.1016/S0304-4076(01)00098-7 Odhiambo, N.M. (2020), “Oil p ice and economic g ow h o oil-impo ing coun ies: a e iew o in e na ional li e a u e, Applied Econome ics and In e na ional De elopmen ,Vol.20. Vespignani,J.M.andRagha an,M.K.(2019),“Oil cu se, economic g ow h and ade openness”, Globaliza ion Ins i u e Wo king Pape , Vol. 2019, a ailable a : h ps://doi.o g/10.24149/ gwp370. Wida jono, A. and Susan un, I. (2020), “Oil and ood p ices o a ne oil impo ing-coun y: how a e ela ed in Indonesia?”,In e na ional Jou nal o Ene gy Economics and Policy, Vol. 10 No. 5, pp. 255-263. Oil p ice fluc ua ions and economic g ow h 367 Appendix Figu e A1. De elopmen o oil p ices o e he s udy pe iod 0 20 40 60 80 100 120 140 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 USD Sou ce: The In e na ional Ene gy Annual da abase REPS 8,5 368 Figu e A2. The de elopmen o c ude oil p ice and GDP g ow h o MENA oil-expo coun ies –2 –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Alge ia –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Bah ain –8 –4 0 4 8 12 70 75 80 85 90 95 00 05 10 15 Kuwai –15 –10 –5 0 5 10 70 75 80 85 90 95 00 05 10 15 Libyia –2 –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Oman –4 –2 0 2 4 6 70 75 80 85 90 95 00 05 10 15 Qa a –4 –2 0 2 4 6 70 75 80 85 90 95 00 05 10 15 Saudi A abia –4 0 4 8 12 16 70 75 80 85 90 95 00 05 10 15 GLGDP COP UAE Sou ce: C ea ed by he au ho Oil p ice fluc ua ions and economic g ow h 369 Figu e A3. The de elopmen o c ude oil p ice ola ili y and GDP o MENA oil-expo coun ies –0.2 –0.1 0.0 0.1 0.2 0.3 0.4 70 75 80 85 90 95 00 05 10 15 Alge ia –0.1 0.0 0.1 0.2 0.3 0.4 0.5 70 75 80 85 90 95 00 05 10 15 Bah ain –0.8 –0.4 0.0 0.4 0.8 1.2 70 75 80 85 90 95 00 05 10 15 Kuwai –1.5 –1.0 –0.5 0.0 0.5 1.0 70 75 80 85 90 95 00 05 10 15 Libyia –0.2 –0.1 0.0 0.1 0.2 0.3 0.4 70 75 80 85 90 95 00 05 10 15 Oman –0.4 –0.2 0.0 0.2 0.4 0.6 70 75 80 85 90 95 00 05 10 15 Qa a –0.3 –0.2 –0.1 0.0 0.1 0.2 0.3 0.4 70 75 80 85 90 95 00 05 10 15 Saudi A abia –0.4 0.0 0.4 0.8 1.2 1.6 70 75 80 85 90 95 00 05 10 15 GLGDP VCOP UAE Sou ce: C ea ed by he au ho REPS 8,5 370 Figu e A4. The de elopmen o c ude oil p ice and GDP o MENA oil- impo coun ies 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Egy p –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Is ae l –2 0 2 4 6 70 75 80 85 90 95 00 05 10 15 Jo dan – 10 –5 0 5 10 70 75 80 85 90 95 00 05 10 15 Lebanon –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Mo o c o –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Sudan –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Tunisia –1 0 1 2 3 4 5 70 75 80 85 90 95 00 05 10 15 Tu key –15 –10 –5 0 5 70 75 80 85 90 95 00 05 10 15 GLGDP COP Yiemen Sou ce: C ea ed by he au ho Oil p ice fluc ua ions and economic g ow h 371 Figu e A5. The de elopmen o c ude oil p ice ola ili y and GDP o MENA oil-impo coun ies 0.00 0.04 0.08 0.12 0.16 70 75 80 85 90 95 00 05 10 15 Egy p –0.04 0.00 0.04 0.08 0.12 70 75 80 85 90 95 00 05 10 15 Is ae l –0.2 –0.1 0.0 0.1 0.2 0.3 70 75 80 85 90 95 00 05 10 15 Jo dan – 1.0 – 0.5 0.0 0.5 1.0 70 75 80 85 90 95 00 05 10 15 Lebanon –0.08 –0.04 0.00 0.04 0.08 0.12 70 75 80 85 90 95 00 05 10 15 Mo o c o –0.08 –0.04 0.00 0.04 0.08 0.12 0.16 70 75 80 85 90 95 00 05 10 15 Sudan -0.05 0.00 0.05 0.10 0.15 0.20 70 75 80 85 90 95 00 05 10 15 Tunisia –0.08 –0.04 0.00 0.04 0.08 0.12 70 75 80 85 90 95 00 05 10 15 Tu key –1.6 –1.2 –0.8 –0.4 0.0 0.4 70 75 80 85 90 95 00 05 10 15 GLGDP VCOP Yiemen Sou ce: C ea ed by he au ho REPS 8,5 372 Figu e A6. The ola ili y o oil p ice o e he pe iod o s udy 0.000 0.002 0.004 0.006 0.008 0.010 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Sou ce: C ea ed by he au ho Oil p ice fluc ua ions and economic g ow h 373 Figu e A7. Di e en kinds o oil p ice ola ili y 0.000 0.002 0.004 0.006 0.008 0.010 0.012 1975 1980 1985 1990 1995 2000 2005 2010 2015 SVCOP VCOP Sou ce: Calcula ed by he au ho REPS 8,5 374 Table A1. Desc ip i e s a is ics Measu e Y COP VCOP ERD ALD GFC PG SSE INS Mean 0.055 0.064 0.0007 0.0001 12.930 23.242 3.35 65.92 4.970 Median 0.046 0.049 0.0003 0.0030 14.125 23.128 2.58 70.26 5.200 Maxi 0.897 1.11 0.0103 1.1003 17.0650 26.590 17.63 98.46 6.610 Min 1.331 0.65 0.00006 0.7378 6.90775 19.406 3.10 0.000 0.710 S d. de . 0.155 0.31 0.00150 0.1297 2.9712 1.366 2.62 27.29 1.086 Ja que 2,035 (0.00) 206 (0.00) 3,9362.4 (0.00) 8,977.66 (0.00) 61.678 (0.00) 9.12 (0.01) 3,630.0 (0.000) 30.58 (0.00) 120 (0.00) Sou ce: C ea ed by he au ho Table A2. Co ela ion ma ix o MENA oil-expo coun ies Va iable Y COP VCOP EPG ERD GFC PG SSE INS Y1.000 0.270 0.376 0.207 0.078 0.028 0.081 0.151 0.241 COP 0.270 1.000 0.214 0.268 0.075 0.461 0.551 0.286 0.497 VCOP 0.376 0.214 1.000 0.051 0.029 0.010 0.075 0.051 0.119 EPG 0.207 0.268 0.051 1.000 0.042 0.315 0.023 0.512 0.568 ERD 0.078 0.075 0.029 0.042 1.000 0.136 0.013 0.125 0.079 GFC 0.028 0.461 0.010 0.315 0.136 1.000 0.566 0.324 0.326 PG 0.081 0.551 0.075 0.023 0.013 0.566 1.000 0.310 0.493 SSE 0.151 0.286 0.051 0.512 0.125 0.324 0.310 1.000 0.360 INS 0.241 0.497 0.119 0.568 0.079 0.326 0.493 0.360 1.000 Sou ce: Calcula ed by he au ho Table A3. Co ela ion ma ix o MENA oil-impo coun ies Va iable GLGDP COP VCOP EPG ERD GFC PG SSE INS GLGDP 1.000 0.022 0.038 0.192 0.023 0.003 0.143 0.058 0.172 COP 0.022 1.000 0.144 0.102 0.034 0.098 0.175 0.042 0.275 VCOP 0.038 0.144 1.000 0.015 0.146 0.045 0.015 0.009 0.133 EPG 0.192 0.102 0.015 1.000 0.041 0.556 0.594 0.063 0.046 ERD 0.023 0.034 0.146 0.041 1.000 0.038 0.084 0.002 0.171 GFC 0.003 0.098 0.045 0.556 0.038 1.000 0.351 0.520 0.441 PG 0.143 0.175 0.015 0.594 0.084 0.351 1.000 0.054 0.153 SSE 0.058 0.042 0.009 0.063 0.002 0.520 0.054 1.000 0.278 INS 0.172 0.275 0.133 0.046 0.171 0.441 0.153 0.278 1.000 Sou ce: Calcula ed by he au ho Oil p ice fluc ua ions and economic g ow h 375 Table A4. Uni oo s a is ics Va iable ADF PP COP 13.80 (0.0000)*** 13.792 (0.0000)*** VCOP 4.564 (0.0002)*** 4.575 (0.0002)*** Y217.306 (0.000)*** 365.723 (0.000)*** ER 229.899 (0.000)*** 131.014 (0.000)** ALD 77.1695 (0.000)*** 99.048 (0.000)** EPG 61.86 (0.002)*** 66.54 (0.000)*** GFC 12.583 (0.05)* 57.62 (0.000)*** PG 107.05 (0.000)*** 56.2 (0.000)*** SSE 12.27 (0.05)* 42.29 (0.04)** INS 87.09 (0.000)*** 46.44 (0.047)** No es: ***Means he coe ficien is significan wi h 1, 5 and 10%; **indica e he coe ficien is significan wi h p obabili y 5 and 10%; *indica es significan wi h p obabili y 10% Sou ce: Calcula ed by he au ho Table A5. Vola ili y o oil p ices gene a ed om he GARCH model Va iable Coe icien P obabili y COP(1) 1.179471 0.0000 COP(2) 0.179295 0.0000 Va iance equa ion C0.00488 0.2825 RESID(1)^2 0.169321 0.0000 GARCH(1) 0.596515 0.0000 T-DIST. DOF 2.967606 0.0000 R-squa ed 0.995065 Adjus ed R 2 0.995057 Du bin-Wa son s a 1.974966 Sou ce: Calcula ed by he au ho REPS 8,5 376