Oil Price Shocks and Stock Markets in Oil Importing Countries: Evidence from Egypt, Morocco, and Jordan
DOI:
https://doi.org/10.47743/saeb-2021-0013Keywords:
oil price shocks, stock markets returns, Egypt, Morocco, JordanAbstract
This study aims to investigate the dynamic relationship between Oil price Shocks and stock markets returns in Egypt, Morocco, and Jordan as oil-importing countries in the MENA region, over the period (2005-2018). Vector auto regressive regressions (VAR), Granger causality tests, and Impulse Response technique are employed to achieve the objectives of the study. Using weekly data, the results point to a causal relation flowing from oil prices to stock market returns in all the three countries under investigation although with different lags and different patterns of the response according to the impulse response function outcomes. These findings have important implications for academics, domestic and international investor, investment manager and policy makers.
JEL Codes - Q41; E44; N15
References
Abdelsalam, M. A. M., 2020. Oil price fluctuations and economic growth: the case of MENA countries. Review of Economics and Political Science, ahead-of-print(ahead-of-print). http://dx.doi.org/10.1108/REPS-12-2019-0162
Abdulkarim, F. M., Akinlaso, M. I., Hamid, B. A., and Ali, H. S., 2020. The nexus between oil price and islamic stock markets in Africa: A wavelet and Multivariate-GARCH approach. Borsa Istanbul Review, 20(2), 108-120. http://dx.doi.org/10.1016/j.bir.2019.11.001
Ajmi, A. N., El-montasser, G., Hammoudeh, S., and Nguyen, D. K., 2014. Oil prices and MENA stock markets: new evidence from nonlinear and asymmetric causalities during and after the crisis period. Applied Economics, 46(18), 2167-2177. http://dx.doi.org/10.1080/00036846.2014.896987
Al-Fayoumi, A. N., 2009. Oil Prices and Stock Market Returns in Oil Importing Countries: The Case of Turkey, Tunisia and Jordan. European. Journal of Economics, Finance and Administrative Science, 16, 86-101.
Al-Hajj, E., Al-Mulali, U., and Solarin, S. A., 2018. Oil Price Shocks and Stock Returns Nexus for Malaysia: Fresh Evidence from nonlinear ARDL test. Energy Reports, 4(November), 624-637. http://dx.doi.org/10.1016/j.egyr.2018.10.002
Al-Mulali, U., and Binti Che Sab, C. N., 2012. The Impact of Energy Consumption and CO2 Emission on the Economic Growth and Financial Development in the Sub Saharan African Countries. Energy, 39(1), 180-186. http://dx.doi.org/10.1016/j.energy.2012.01.032
Al-Qudah, A., 2014. The Impact of Oil Price Shocks on Amman stock Exchange Real Returns. International Journal of Business and Social Science, 5(12), 224-235.
Arouri, M., Lahiani, A., and Nguyen, K. D., 2011. Return and Volatility Transmission between World Oil Prices and Stock Markets of the GCC Countries. Economic Modelling, 28, 1815-1825.
Arouri, M. E. H., and Rault, C., 2012. Oil Prices and Stock Markets in GCC Countries: Empirical Evidence from Panel Analysis. International Journal of Finance & Economics, 17(3), 242-253.
Bjørnland, H. C., 2009. Oil Price Shocks and Stock Market Booms in an Oil exporting Country. Scottish Journal of Political Economy, 56(2), 232-254. http://dx.doi.org/10.1111/j.1467-9485.2009.00482.x
Bouri, E., Awartani, B., and Maghyereh, A., 2016. Crude Oil prices and Sectoral Stock Returns in Jordan around the Arab uprisings of 2010. Energy Economics, 56(May), 205-214. http://dx.doi.org/10.1016/j.eneco.2016.03.021
British Petroleum, 2019. Energy with Purpose. BP Annual Report and Form, 20-F, 2019.
Brown, S. J., Otsuki, T., Elton, E. J., and Gruber, M., 1990. Macroeconomic Factors and the Japanese Equity Markets: The CAPMD project. In E. J. Elton and M. Gruber (Eds.), Japanese Capital Markets. New York: Harper and Row.
Burbidge, J., and Harrison, A., 1984. Testing for the Effects of Oil-Price Rises Using Vector Autoregressions. International Economic Review, 25(2), 459-484. http://dx.doi.org/10.2307/2526209
Chen, N. F., Roll, R., and Ross, S. A., 1986. Economic Forces and the Stock Market. The Journal of Business, 59(3), 383-403. http://dx.doi.org/10.1086/296344
Chen, S. S., 2010. Do Higher Oil Prices Push the Stock Market into Bear Territory? Energy Economics, 32(2), 490-495. http://dx.doi.org/10.1016/j.eneco.2009.08.018
Cong, R. G., Wei, Y. M., Jiao, J. L., and Fan, Y., 2008. Relationships between Oil Price Shocks and Stock Market: An Empirical Analysis from China. Energy Policy, 36(9), 3544-3553. http://dx.doi.org/10.1016/j.enpol.2008.06.006
Ferson, W. E., and Harvey, C. R., 1995. Predictability and Time-varying Risk in World Equity Markets. Research in Finance, 13, 25-88.
Filis, G., 2010. Macro Economy, Stock Market and Oil Prices: Do Meaningful Relationships Exist among their Cyclical Fluctuations? Energy Economics, 32(4), 877-886. http://dx.doi.org/10.1016/j.eneco.2010.03.010
Gisser, M., and Goodwin, T. H., 1986. Crude Oil and the Macroeconomy: Tests of Some Popular Notions: Note. Journal of Money, Credit and Banking, 18(1), 95-103. http://dx.doi.org/10.2307/1992323
Gorus, M. S., and Aslan, M., 2019. Impacts of Economic Indicators on Environmental Degradation: Evidence from MENA Countries. Renewable & Sustainable Energy Reviews, 103(April), 259-268. http://dx.doi.org/10.1016/j.rser.2018.12.042
Granger, C. W., 1969. Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica, 37(3), 424-438. http://dx.doi.org/10.2307/1912791
Hamao, Y., 1988. An Empirical Examination of Arbitrage Pricing Theory: Using Japanese data. Japan and the World Economy, 1(1), 45-61. http://dx.doi.org/10.1016/0922-1425(88)90005-9
Hamilton, D. J., 1983. Oil and the macroeconomy since World War II. Journal of Political Economy, 91(2), 228-248. http://dx.doi.org/10.1086/261140
Hamilton, D. J., and James, D. H., 2009. Causes and Consequences of the Oil Shock 2007-2009. Brookings Papers on Economic Activity, 2009(1), 215-261. http://dx.doi.org/10.1353/eca.0.0047
Huang, D. R., Masulis, R. W., and Stoll, H., 1996. Energy Shocks and Financial Markets. Journal of Futures Markets, 16(1), 1-27. http://dx.doi.org/10.1002/(SICI)1096-9934(199602)16:13.0.CO;2-Q
International Institute for Labour StudIes, 2013. Executive summary - World of Work Report 2013: Repairing the economic and social fabric. World of Work Report, 2013(1), i-4. http://dx.doi.org/10.1002/wow3.33
International Monetary Fund, 2011. International Monetary Fund Annual Report 2011. Pursuing Equitable and Balanced Growth. http://dx.doi.org/10.5089/9781616351120.011
Jammazi, R., and Aloui, C., 2010. Wavelet Decomposition and Regime shifts: Assessing the effects of crude oil shocks on stock market returns. Energy Policy, 38(3), 1415-1435. http://dx.doi.org/10.1016/j.enpol.2009.11.023
Jiménez-Rodríguez, R., and Sanchez, M., 2005. Oil Price Shocks and Real GDP Growth: Empirical Evidence for Some OECD Countries. Applied Economics, 37(2), 201-228. http://dx.doi.org/10.1080/0003684042000281561
Jones, C. M., and Kaul, G., 1996. Oil and Stock Markets. The Journal of Finance, 51(2), 463-491. http://dx.doi.org/10.1111/j.1540-6261.1996.tb02691.x
Kaneko, T., and Lee, B. S., 1995. Relative Importance of Economic Factors in the US and Japanese Stock Markets. Journal of the Japanese and International Economies, 9(3), 290-307. http://dx.doi.org/10.1006/jjie.1995.1015
Korhonen, I., and Ledyaeva, S., 2010. Trade Linkages and Macroeconomic Effects of the Price of Oil. Energy Economics, 32(4), 848-856. http://dx.doi.org/10.1016/j.eneco.2009.11.005
Lescaroux, F., and Mignon, V., 2008. On the Influence of Oil Prices on Economic Activity and other Macroeconomic and Financial Variables. OPEC Energy Review, 32(4), 343-380. http://dx.doi.org/10.1111/j.1753-0237.2009.00157.x
Maghyereh, M., and Al-Kandari, A., 2007. Oil Prices and Stock Markets in GCC Countries: New Evidence from non -linear Cointegration analysis. Managerial Finance, 33(7), 449-460. http://dx.doi.org/10.1108/03074350710753735
Mendoza, O., and Vera, D., 2010. The Asymmetric Effects of Oil Shocks on an Oil-Exporting Economy. Cuadernos de Economia (Santiago, Chile), 47(135), 3-13. http://dx.doi.org/10.4067/S0717-68212010000100001
Miller, J. I., and Ratti, R. A., 2009. Crude Oil and Stock Markets: Stability, Instability, and Bubbles. Energy Economics, 31(4), 559-568. http://dx.doi.org/10.1016/j.eneco.2009.01.009
Mohanty, S. K., Nandha, M., Turkistani, A. Q., and Alaitani, M. Y., 2011. Oil Price Movements and Stock Market Returns: Evidence from Gulf Cooperation Council (GCC) countries. Global Finance Journal, 22(1), 42-55. http://dx.doi.org/10.1016/j.gfj.2011.05.004
Mokni, K., 2020. Time-Varying Effect of Oil Price Shocks on the Stock Market Returns: Evidence from Oil Importing and Oil-Exporting Countries. Energy Reports, 6(November), 605-619. http://dx.doi.org/10.1016/j.egyr.2020.03.002
Muhammad, B., 2019. Energy Consumption, CO2 Emissions and Economic Growth in Developed, Emerging and Middle East and North Africa Countries. Energy, 179, 232-245.
Nandha, M., and Faff, R., 2008. Does Oil Move Equity Prices? A Global View. Energy Economics, 30(3), 986-997. http://dx.doi.org/10.1016/j.eneco.2007.09.003
O'Neill, J. T., Penm, J., and Terrell, D. R., 2008. The Role of Higher Oil Prices: A Case of Major Developed Countries. Research in Finance, 24, 287-299. http://dx.doi.org/10.1016/S0196-3821(07)00211-0
OECD, 2006. MENA-OECD Investment Program National Investment Reform Agenda Workshop for the Hashemite Kingdom of Jordan. http://www.oecd.org/dataoecd/4/29/38148879.pdf.
Papapetrou, E., 2001. Oil Price Shocks, Stock Market, Economic Activity and Employment in Greece. Energy Economics, 23(5), 511-532. http://dx.doi.org/10.1016/S0140-9883(01)00078-0
Park, J., and Ratti, R. A., 2008. Oil Prices and Stock Markets in the U.S. and 13 European Countries. Energy Economics, 30(5), 2587-2608. http://dx.doi.org/10.1016/j.eneco.2008.04.003
Sadorsky, P., 1999. Oil Price Shocks and Stock Market Activity. Energy Economics, 21(5), 449-469. http://dx.doi.org/10.1016/S0140-9883(99)00020-1
Saidi, K., and Hammami, S., 2015. The Impact of CO2 Emissions and Economic Growth on Energy Consumption in 58 Countries. Energy Reports, 1(November), 62-70. http://dx.doi.org/10.1016/j.egyr.2015.01.003
Sarwar, G., 2012. Is VIX an Investor Fear Gauge in BRIC Equity Markets? Journal of Multinational Financial Management, 22(3), 55-65. http://dx.doi.org/10.1016/j.mulfin.2012.01.003
Sims, C. A., 1980. Macroeconomics and Reality. Econometrica, 48(1), 1-48. http://dx.doi.org/10.2307/1912017
Venditti, F., and Veronese, G., 2020. Global Financial Markets and Oil Price Shocks in Real Time. European Central Bank, Working Paper Series, 2472. http://dx.doi.org/10.2139/ssrn.3577551
Wang, Y., Wu, C., and Yang, L., 2013. Oil Price Shocks and Stock Market Activities: Evidence from Oil Importing and Oil-Exporting Countries. Journal of Comparative Economics, 41(4), 1220-1239. http://dx.doi.org/10.1016/j.jce.2012.12.004
World Bank, 2018. Development Indicators. from http://datatopics.worldbank.org/world-development-indicators/
Youssef, M., and Mokni, K., 2019. Do Crude Oil Prices Drive the Relationship between Stock Markets of Oil-Importing and Oil-Exporting Countries? Economies, 7(3), 70. http://dx.doi.org/10.3390/economis7030070
Zaki, F., Elgamma, M., and Hussainey, K., 2016. Macro Economy, Stock Market and Oil Prices Relationships before and after the Egyptian Revolution Era. Doha Institute for Graduate Studies. https://www.dohainstitute.edu.qa/MEEA2016/Downloads/Fatma%20Zaki.pdf.
Zamereith Gourène, G. A., and Mendy, P., 2018. Oil prices and African Stock Markets Co-Movement: A Time and Frequency Analysis. Journal of African Trade, 5(1-2), 55-67. http://dx.doi.org/10.1016/j.joat.2018.03.002
Zarour, B. A., 2006. Wild Oil Prices, but Brave Stock Markets! The case of GCC Stock Markets. Operations Research, 6(2), 145-162. http://dx.doi.org/10.1007/BF02941229
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 SCIENTIFIC ANNALS OF ECONOMICS AND BUSINESS
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
All accepted papers are published on an Open Access basis.
The Open Access License is based on the Creative Commons license.
The non-commercial use of the article will be governed by the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License as currently displayed on https://creativecommons.org/licenses/by-nc-nd/4.0
Under the Creative Commons Attribution-NonCommercial-NoDerivatives license, the author(s) and users are free to share (copy, distribute and transmit the contribution) under the following conditions:
1. they must attribute the contribution in the manner specified by the author or licensor,
2. they may not use this contribution for commercial purposes,
3. they may not alter, transform, or build upon this work.
This work is licenced under a 
