IMPACT OF OIL PRICE VOLATILITY AND TRADE OPENNESS ON A GROWING ECONOMY
Keywords:oil price, growth, volatility, openness, JEL Code: O40, O24
This study investigates the interplay between oil price volatility, economic growth, and openness using data spanning from 1980 to 2020. Bound cointegration and regression methods were employed to analyze both short and long-term effects. The results indicate that in the short run, oil price volatility negatively impacts economic growth. However, as the economy becomes more resilient over time, oil price volatility begins to have a positive effect on economic growth in the long run. Additionally, trade openness is found to have a positive and significant impact on economic growth in the short term. Nevertheless, the influence of trade openness and exchange rates on long-term economic growth is statistically weaker. This suggests that the adverse impact of oil price volatility is more pronounced in the short run and diminishes over the long term. Consequently, policymakers should focus on managing exchange rates and leveraging comparative trade advantages to promote economic growth.
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