Impact of oil price volatility on the balance of Payment of oil-based economies

Abstract

There are several countries which are dependent on crude oil exports as their major source of income. This report investigates the impact of crude oil price volatility on the balance of payment of ten different countries taking the data from 2005 to 2015. The countries are selected based on their 2012 (pre-oil price crash) oil income shares in GDP. The correlation and causality between crude oil prices (independent variable) and balance of payment (dependent variable) is analysed for the ten countries. The regression results indicate that the crude oil price and balance of payment of all countries except Libya are correlated and the degree of correlation is found to be high for most countries. But, the Granger causality test reveals cause-effect relationship between the two variables only for Angola, Venezuela and Chad.