IMF Working Papers

A Crude Shock: Explaining the Impact of the 2014-16 Oil Price Decline Across Exporters

By Francesco Grigoli, Alexander Herman, Andrew J Swiston

July 18, 2017

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Francesco Grigoli, Alexander Herman, and Andrew J Swiston. A Crude Shock: Explaining the Impact of the 2014-16 Oil Price Decline Across Exporters, (USA: International Monetary Fund, 2017) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The decline in oil prices in 2014-16 was one of the sharpest in history, and put to test the resilience of oil exporters. We examine the degree to which economic fundamentals entering the oil price decline explain the impact on economic growth across oil exporting economies, and derive policy implications as to what factors help to mitigate the negative effects. We find that pre-existing fundamentals account for about half of the cross-country variation in the impact of the shock. Oil exporters that weathered the shock better tended to have a stronger fiscal position, higher foreign currency liquidity buffers, a more diversified export base, a history of price stability, and a more flexible exchange rate regime. Within this group of countries, the impact of the shock is not found to be related to the size of oil exports, or the share of oil in fiscal revenue or economic activity.

Subject: Commodities, Exchange rate arrangements, Exchange rate flexibility, Foreign exchange, International trade, Oil, Oil exports, Oil prices, Prices

Keywords: Event study, Exchange rate, Exchange rate arrangements, Exchange rate flexibility, Fundamentals, Global, Growth outturn, Oil, Oil exporter, Oil exporters, Oil exports, Oil price, Oil price decline, Oil price drop, Oil price fall, Oil price futures curve, Oil price shock, Oil prices, Policy space, Price, Price decline, Summary statistics, Transmission of shocks, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/160
Stock No:

WPIEA2017160
ISBN:

9781484310175
ISSN:

1018-5941