Examining the effect of oil price shocks and the role of government size in oil exporting and importing countries

Document Type : Original Article

Authors

1 PhD student of Islamic Economics, Islamic Azad University, Central Tehran branch

2 ISLAMIC AZAD UNIVERSITY TEBRAN CE TRAL BRANCH, ECONOMIC FACULTY

3 Assistant Professor, Faculty of Finance and Accounting, Islamic Azad University, Central Tehran Branch

Abstract

Oil price shocks are the main source of economic fluctuations in oil-producing and oil-exporting countries, but many factors affect the intensity of the impact of these shocks in countries. In this regard, the aim of the present study is to investigate the effect of oil shocks on macroeconomic variables in oil-exporting and oil-importing countries in 14 selected countries from among oil exporters and importers and to examine the role of government size using a vector autoregression model in a panel data space based on annual data over the period 1980-2021. The results of estimating the model using STATA software show that according to the results, the effects of shocks on macroeconomic variables are different and in oil-importing and oil-exporting countries, the magnitude and direction of these changes are different. In oil-exporting countries, the response of most of the variables under study to the oil price shock does not eventually dissipate after fluctuations. In importing countries, the response of the variables under study to shocks eventually dissipates after fluctuations. In the case of oil-exporting countries, the increase in oil prices from both sides, the demand side through the government budget and the supply side by affecting the investment of the public and private sectors, stimulates the economies of these countries, which in turn has an increasing or decreasing effect on the economic growth of oil-exporting countries, and the result of these two effects is known as the net effect of oil income on the economies of these countries. In oil-exporting countries, the income from the export of this product constitutes a significant part of the government's income. In these countries, the amount of government spending is related to oil income. Therefore, it seems that the size of the government in these countries is affected by the price of oil in the world markets. From the perspective of policy recommendations, governments should develop and diversify non-oil production and service sectors to reduce economic dependence on oil.

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Public Sector Economics Studies
Volume 4, Issue 3 - Serial Number 13
September 2025
Pages 413-440

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History

  • Receive Date: 20 October 2024
  • Revise Date: 27 April 2025
  • Accept Date: 26 April 2025

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