The Effect of Oil Price Shocks on Household Risk Preparation in Selected Oil Exporting Countries

اقتصاد و توسعه منطقه ای

Volume 31, Autumn&Winter2025 - Serial Number 28, February 2025

Document Type: Original Article

DOI: 10.22067/erd.2024.90695.1255

Authors

Roa'a Mohammed kadhim¹; sara ghobadi^{* 2}; Hussein Shnawa Majeed Al-Zerkani³; Hossein Sharifi Renani⁴

¹Ph.D. student in Economics, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

²Assistant Professor of Economics, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

³Associate Professor of Economics, Department of Economics, Alkut University, waset, Iraq.

⁴Associate Professor of Economics, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

Abstract

The household is one of the important institutions of the society, which has the role of cultivating the labor force and turning it into human capital. This important institution faces risks and harmful issues, the ability to deal with them affects the well-being of the family members and, as a result, the society. In oil exporting countries, oil price shocks are important factors that affect all aspects of the economy, including the household risk preparation. The aim of the current research is to analyze the symmetrical and asymmetrical effects of oil price shocks on household risk preparation in 10 selected oil exporting countries during the period of 2002-2021. For this purpose, first, the index of the household risk preparation was created using the variables of access to financial resources, social support, human capital and the economic capacity of the government and by applying the principal component analysis (PCA) method for the studied period. To achieve the mentioned goal, the principal component analysis (PMG) and the nonlinear panel autoregressive distributed lags method (PNARDL) were used. The results showed that estimation by nonlinear PNARDL method is more efficient than linear PMG method. The results of PNARDL indicated that in the long run, the positive oil price shock has led to an increase in the household risk preparation, while the negative oil price shock has led to a decrease in the the household risk preparation. Other variables in the model, including the global demand for oil and capital, have led to an increase in the the household risk preparation, and the increase in population has led to its decrease. The error correction coefficient also shows that in each period, 35.4% of short-term imbalances have been adjusted and moved towards their long-term trend. The result of the symmetry test indicated the symmetry of positive and negative oil price shocks in the short term and their asymmetry in the long term.

Keywords

The Household Risk Preparation; Oil Shock; Principal Component Analysis; Nonlinear Panel Autoregressive Distributed Lags Method

References