The Impact of Oil Price Uncertainty on Real Output Growth in the Middle East Oil-Importing Countries : An Empirical Investigation

This paper provides evidence on the influence of oil price uncertainty on the real economic activity in two Middle Eastern countries, namely, Jordan and Turkey that are heavily dependent on oil imports. To measure the effect of uncertainty, the paper combines a bivariate structural VAR with a GARCH-in mean process that allows the matrix of conditional standard deviations to affect the conditional mean. Our results indicate that oil price uncertainties have negative influence on the industrial production of Jordan and Turkey. For instance, the increase in one standard error of oil price uncertainty is found to be associated with a decline of 0.81% and 1.01% in the industrial production of Jordan and Turkey, respectively. Moreover, consistent with the recent empirical evidence, we find that negative and positive oil price shocks have the same impact in both countries