Oil Price Changes and Industrial Output in the MENA Region: Nonlinearities and Asymmetries

In this paper, we investigate the nature of asymmetry in the influence of oil price changes on output in five MENA countries. These are Saudi Arabia, Egypt, Kuwait, the United Arab Emirates, and Tunisia. To get more observation for our analysis, we proxy GDP with industrial output and hence our inference is based on a relatively larger sample compared to previous studies. The results that we obtain are interesting and intuitive. First, we find that growth in MENA countries is linked to oil in the sense that it benefits from higher oil prices and it gets hurt by a fall in the oil market. Moreover, there are pronounced short- and long-term asymmetries in the influence of oil on output. In particular, the output is faster to respond to increases in the oil price than it responds to decreases. The long-term influence to a rise in oil is also higher, though it is realized over a longer period. These results are important and can be used to guide policies that are concerned with stabilizing the economies of the MENA region against oil price fluctuations.