Analyzing the association between crude oil price volatility and economic growth in OECD economies

Abstract

This research has sought to determine how the crude oil price volatility (COPV) relates to economic growth (EG) using the case of the OECD countries between 2000 and 2022. Therefore, this article employs various panel data estimation strategies: random effect regression, fixed effect regression, dynamic panel data estimation, one-step system GMM and dynamic panel data estimation; two-step system GMM. The chosen time domain consists of oil-producing and consuming major countries within the OECD. The key findings of the study suggest that COPV has adverse effects on the growth of OECD economies. This would consequently mean that the knowledge of how volatility in crude oil prices (COPs) could affect very influential economic performance is of paramount importance and might bring out certain vital challenges that could be brought up by oil market volatility. The article ends with a few policy suggestions that may assist in mitigating the adverse impact of exogenous, unpredictable fluctuations in oil prices on the EG of the countries of the OECD.

Keywords

• Oil price volatility
• inflation rate
• OECD countries
• economic growth
• panel data estimation
• Economics