Macroeconomy and Financial Market Effects of Oil Price Changes: A Comparison of Large Net Oil-Producer and Oil-Consumer Countries

Abstract

This paper considers variation in the effects of oil price changes on the economies of large net oil-producer and large net oil-consumer countries using a bias-corrected, least squares dummy variable approach, Granger causality tests and monthly data from May 1986 to January 2013. We find that oil prices Granger cause most macro aspects of net oil producers but not those of net oil consumers. In contrast, oil prices exert a greater influence on financial markets in net oil consumers than in net oil producers. Overall, we identify substantial differences in the responses of the macroeconomy and financial markets to oil price changes in the two groups of countries.