Macroeconomic impacts of oil price shocks on inflation and real exchange rate: Evidence from selected MENA countries

In this paper, we attempt to analyze, during the period spanning from January 2000 to July 2015, the impact of oil price shocks on inflationand the real exchange rate in a set of oil importers and exporters MENA countries: Tunisia, Morocco, Algeria, Bahrain, Saudi Arabia and Iran (MENA-6) using a Structural VAR model. The impulseresponse functions reveal that, in the long run, oil price fluctuations havethe major impact on real exchange rate of the oilimporting countries (Tunisiaand Morocco) while the impact on inflation is smaller and absorbed by the rigidity of subsidized products prices. The variance decomposition results also assertthat oil price shocks do not explain notably thevariation in the twoconsidered variables in Algeria and Iran.We further identify an impact on the two variables that is both statistically significant and economically large in the rest of countries