New Study by Turner College Economist Examines Macroeconomic Impact of Oil Price Shocks in Eastern Europe
A new study by Turner College economist Frank Mixon and his coauthors Kamal Upadhyaya of the University of New Haven and Hem Basnet of Lincoln University examines the macroeconomic impact of oil price shocks on core Eastern European countries—namely Bulgaria, Czech Republic, Hungary, Poland, and Romania—that are heavily reliant on oil imports, primarily from Russia, and are members of the European Union (EU) that do not use the Euro. To do so, the authors utilize a Structural Vector Autoregression (SVAR) model that includes oil prices and three key macroeconomic variables—namely, real output, inflation, and the real exchange rate. The results that are discussed in more detail in the study, which is forthcoming in Applied Economics, suggest that these countries initially experience a contraction in real GDP following an oil price shock. However, the contractions are relatively short-lived, as real GDP tends to recover within a few quarters of the oil price shock. In terms of the larger set of macroeconomic indicators explored in the study, variance decomposition indicates that oil price shocks have a more pronounced influence on real GDP in some countries, while the inflation rate and the real exchange rate are most affected by the oil price shock in other countries.
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