Oil price volatility and economic growth : evidence from advanced economies using more than a century’s data

Abstract

This paper uses a number of different panel data estimators, including fixed effects, bias-corrected least squares dummy variables (LSDVC), generalised methods of moments (GMM), feasible generalised least squares (FGLS), and random coefficients (RC) to analyse the impact of real oil price volatility on the growth in real GDP for 17 member countries of the Organisation for Economic Co-operation and Development (OECD), over a 144-year time period from 1870 to 2013. The main finding of the study is that oil price volatility has a negative and statistically significant impact on economic growth of the OECD countries in the sample. In addition, when allowing for slope heterogeneity, oil-producing countries are significantly negatively impacted by oil price uncertainty, most notably Norway and Canada.