Regional Disparities of Oil Price Effects

In this paper, an empirical analysis is used to compare the effects of oil price changeson the economic activity of different regions in the world and the world’s economy asa whole. Firstly, a model is applied to investigate whether the oil price shock has theGranger causality to the GDP and CPI. Secondly, we apply a VAR model with cointegration technique to examine how the GDP & CPI of these regions are affected by changes in oil prices in the long-run. Finally, a vector error correction model (VECM) is employed to analyze the short-run dynamics of the GDP & CPI for these regions and the world economy as a whole. Our main findings indicate that the oil price increases give a negative impact on the GDP and positive effect on the CPI in most of regions and world economy as a whole. The result is somewhat different about Middle East, which is a net oil exporter. Although the effects of oil price changes are different from one region to another region but the direction is as the same as each other’s. The selected regions are: 5 Top Economy of Euro, Latin America, Middle East, East Asia, North America and World Economy.

Keywords:

Oil , regional effects , VAR , VECM