Oil Price Flux and Macroeconomy of Oil Exporters

Oil is an important energy source, embodies the largest commodity market in the world. Global economic performance has been highly correlated with oil price changes. The study considered 10 major oil exporters to measure the effect of oil price changes on their economies considering variables: Oil Prices (OP), Inflation (CPI) , GDP deflator, Lending interest rate (IR), real interest rate (RIR), Official Exchange Rate (EX), and Net domestic credit (LDU).  By applying Johansen Co-integration techniques, long run relationship among variables has been analyzed covering the time period from 1970 to 2019. In order to find the short run relationship, Error Correction Model (ECM) technique is used. Study affirmed that there exist a strong relation among economic variables and oil price fluctuations; however the intensity of relationship displays a variation. Oil prices are associated with GDP deflator and RIR significantly as compared to other variables. Moreover, it can be suggested that each country should observe it own economic strategy in response to price change to reflect on economic policy instead of following some other country trends