Effect of Oil Revenue uncertainty Shocks on Instability of Certain Macroeconomic Variables in Selected Oil-Exporting Countries: A Panel VAR Approach

In significant part of oil-exporting countries, oil revenues are considered as one of the main drivers of the economy. However, these revenues are volatile, uncertain and subject to shocks due to exogenous nature and inherent volatility of oil prices as well as the reality of the hydrocarbon resources’ depletion. On the other hand, oil revenues are independent of the domestic economy as they are mainly derived from exports. This indicate that a significant part of the economy in these countries is exposed to potential instability, depending on the way and quality of these revenues’ management. This article examines the effect of oil revenue shocks on volatility of five macroeconomic variables, i.e. economic growth rate, inflation rate, real exchange rate, liquidity and government size, using panel var from selected oil-exporting countries over the period 2000-2019. The results show that oil instability shocks led to increase in instability of government size, liquidity and exchange rate. In addition, it first increase instability of inflation rate and economic growth rate but subsequently decrease these tow variables’ instability.