The sources of macroeconomic fluctuations in oil exporting countries: A comparative study

This paper studies the sources of macroeconomic fluctuations in oil-exporting countries using a structural VAR approach. By imposing long-run restrictions on a VAR model, four structural shocks are identified: nominal demand, real demand, supply, and oil price shocks. This framework is applied to Iran, Saudi Arabia, Kuwait, and Indonesia. Oil price shocks are shown to be the main source of output fluctuations in Saudi Arabia and Iran, but not in Kuwait and Indonesia. The results can be attributed to the relatively successful experience of Kuwait in the use of stabilization and savings fund and the right structural reforms particularly diversifying away from resource-based production in Indonesia. (c) 2006 Elsevier B.V. All rights reserved.