Analysis of the Asymmetric impact of Oil prices, Exchange rates, and their Uncertainty on Unemployment in Oil-Exporting countries

Document Type : Scientific paper

Authors

1 Iran University of Science & Technology .

2 Faculty Member of Economics

3 Faculty of Progress engineering, Iran university of Science and Technology, Tehran

Abstract

Unemployment is a key economic indicator that has consistently garnered attention from policymakers, economists, and the public. In major oil-exporting countries like members of OPEC, crude oil exports significantly impact revenue, foreign exchange flows, and the labor market. This research investigates the presence of asymmetric interactions between oil price fluctuations, exchange rate changes, and unemployment. To achieve this, annual data (1990-2020) from selected oil-producing countries (Iran, Iraq, Kuwait, United Arab Emirates, Saudi Arabia, and Nigeria) were analyzed. The nonlinear autoregressive distributed lag (NARDL) approach with asymmetric lags will be employed to reveal the asymmetric impacts on unemployment in response to oil price and exchange rate fluctuations. Our findings suggest that positive oil price shocks have a significant short-term impact on increasing unemployment in these countries, while negative oil price shocks have no significant short-term effect on unemployment. However, in the long term, the impact of a positive oil price shock on unemployment is greater than the impact of a negative oil price shock. Additionally, positive exchange rate changes (depreciation of domestic currency against foreign currency) have a significant negative impact on unemployment in the short term. Regarding the long-term effects of exchange rate changes, both positive and negative changes impact unemployment in these selected countries, leading to decreases and increases, respectively. Notably, the magnitude of the impact of appreciations in the exchange rate is greater than that of depreciations.In contrast, in the long term, the effect of a positive oil shock on unemployment is greater than a negative oil shock.

Keywords

Main Subjects

References

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Macroeconomics Research Letter
Volume 19, Issue 42
June 2024
Pages 37-70

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  • Receive Date: 03 April 2024
  • Revise Date: 23 June 2024
  • Accept Date: 27 June 2024

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