The Effects of Oil Prices and Exchange Rates Movements on Economic Growth of the Selected Emerging Oil Dependent Countries

This study aims to investigate the impacts of volatility of oil prices on the real economic growth. Six heavily oil importer emerging market countries are explored in the study. They are also lower middle oil consumer countries, namely Chile, Philippines, Poland, South Africa, Thailand and Turkey. The quarterly dataset covers the period January 1996- December 2016. To gauge volatility of oil prices, quarterly coefficient of variation for oil prices derived by average daily crude oil prices is used as a proxy, together with the gasoline and diesel fuel average pump prices. The results of panel estimation reveal the following findings: Volatility of oil prices concurrently moves with the volatility of foreign exchange rates, which in turn leads to a change in the GDP growth rates. Moreover, for a three month lag, movements of oil prices and exchange rates adversely affect the GDP growth rate for the emerging oil importing countries under investigation. Thus, these results supports the idea that oil price movements make up some part of the volatiliy of exchange rates and gradually affect the GDP growth rates. These results might be helpful for improving adjustment strategies of the economic activity against oil price movements.