Symmetric oil price shocks and government expenditure-real exchange rate nexus: ARDL and SVAR models for an oil-based economy, 1970–2018

Figures & data

Figure 1. Log real exchange rate, real government expenditure, and real OPEC basket oil price.

Table 1. Results of descriptive statistics of government expenditure (GOEX), oil prices (OP), and real exchange rate (EX) for the period of 1970–2018

Components	Oil price (OP)	Real exchange rate (EX)	Government expenditure (GOEX)
Mean	43.33429	3.174893	323,997.5
Median	38.13000	3.431237	221,272.0
Maximum	92.40000	4.391062	1,140,603
Minimum	11.67000	1.433129	6028.000
Std. Dev.	22.98370	0.830504	295,726.8
Skewness	0.530388	−0.685432	1.342782
Kurtosis	2.128458	2.454947	3.716943
Jarque-Bera	3.848197	4.443379	15.77445
Probability	0.146007	0.108426	0.000376
Sum	2123.380	155.5698	15,875,877
Sum Sq. Dev.	25,356.03	33.10740	4.20E+12
Observations	49	49	49

Table 2. Augmented-Dickey Fuller and Phillips-Perron tests

	Augmented-Dickey Fuller		Phillips- Perron
	Level	1^st Difference	Level	1^st Difference
LEXt	−2.352	−2.401**	−1.4966	−2.600***
RGOEXt LOPt	−2.579 –2.396	−6.375* -6.603*	−2.638 –2.428	−6.383* -6.597*

*, **, and *** are statistically significant at 1%, 5% and 10% level, respectively.

Figure 2. The strength of model selection criteria.

Table 3. VAR lag order selection criteria

Lag	Log L	LR	FPE	AIC	SC	HQ
0	−69.02724	NA	0.004930	3.3201211	3.321655	3.246111
1	72.38961	257.6929	1.37e-05	−2.683983	−2.202206	−2.504381
2	95.51657	39.05886*	7.37e-06*	−3.311847*	−2.468738*	−2.997545*
3	99.77479	6.623909	9.24e-06	−3.101102	−1.896660	−2.652098

* significant at 5 percent level

Table 4. The ARDL regression with dependent variable LEX

Variable	Coefficient	St. Error	t-Statistic	Probability
LEX (−1)	1.618584	0.086101	18.79872	0.0000
LEX (−2)	−0.697427	0.081406	−8.567229	0.0000
LOP	0.011082	0.017768	0.623679	0.5368
LOP (−1)	−0.053306	0.023479	−2.270347	0.0293
LOP (−2)	−0.023472	0.023590	−0.994999	0.3264
LOP (−3)	0.063710	0.023748	2.682709	0.0110
LOP (−4)	−0.029507	0.018648	−1.582378	0.1223
RGOEX	0.038861	0.016459	2.361034	0.0238
C	−0.106811	0.080200	−1.331820	0.1913
R^2	0.991196
Adjusted R^2	0.989239
F-Statistics	506.6182
D-W	2.026369

Table 5. FMOLS estimates with dependent variable LEX

Variable	Coefficient	St. Error	t-Statistic	Probability
LOP	−0.348834	0.150043	−2.324902	0.0246
RGOEX	0.299605	0.100510	2.980855	0.0046
C	0.029535	0.638415	0.046263	0.9633
R^2	0.255738
Adjusted R^2	0.222660
Long-run variance	0.201289

Table 6. The ARDL error correction dependent variable LEX

Variable	Coefficient	St. Error	t-Statistic	Probability
D (LEX (−1))	0.697427	0.075502	9.237219	0.0000*
D (LOP)	0.011082	0.015953	0.694650	0.4917
D (LOP (−1))	−0.0110731	0.016438	−0.652815	0.5180
D (LOP (−2))	−0.034203	0.016224	−2.108134	0.0420*
D (LOP (−3))	0.029507	0.017074	1.728181	0.0925
Co-int Eq (−1)	−0.078843	0.019999	−3.942355	0.0004*
R^2	0.801188
Adjusted R^2	0.775700
Log likelihood	94.38760
D-W	2.026369

* significant at 5 percent leve

Table 7. Long-run estimates with dependent variable LEX

Variable	Coefficient	St. Error	t-Statistics	Probability
LOP	−0.399450	0.192951	−2.070212	0.0457*
RGOEX	0.492885	0.152540	3.231186	0.0026*
C	−1.354734	0.940573	−1.440328	0.1584

* significant at 5 percent leve

Table 8. Serial correlation LM test

Breusch-Godfrey Serial Correlation LM Test: Null hypothesis: No serial correlation at up to 2 lags
F-statistics	1.597533	Prob. F (2,23)	0.2172
Obs.*R^2	3.865511	Prob. Chi-square (2)	0.1447

Table 9. F-bBounds test

Test statistics	Value	Significant	I (0)	I (1)
		Asymptotic: n = 100
F-statistics	3.586653	10%	2.63	3.35
K	2	5%	3.10	3.87
		1%	4.13	5

Table 10. Heteroskedasticity test

Breusch-Pagan-Godfrey heteroskedasticity test: null hypothesis: homoskedasticity
F-statistics	7.309587	Prob. F (8,36)	0.0000
Obs.*R^2	27.85291	Prob. Chi-square (8)	0.0005
Scaled explained SS	21.96295	Prob. Chi-square (8)	0.0050

Figure 3. Stability test of the model.

Table 11. Variance decomposition

Response of LOP to:				Response of RGOEX to:			Response of LEX to:
Period	LOP	RGOEX	LEX	LOP	RGOEX	LEX	LOP	RGOEX	LEX
1	0.3087	0.0000	0.0000	0.0457	0.3095	0.0000	0.0416	0.2786	0.2892
2	0.3087	0.0000	0.0000	0.3344	0.3095	0.0000	0.3961	0.5882	0.2892
3	0.2576	0.0048	0.0064	0.4384	0.2960	0.0343	0.6694	0.6281	0.2292
4	0.2129	0.0165	0.0127	0.4668	0.3240	0.0749	0.6908	0.5951	0.2099
5	0.1825	0.0283	0.0166	0.5072	0.3668	0.1050	0.6396	0.5972	0.2193
6	0.1599	0.0372	0.0187	0.5477	0.4049	0.1260	0.6253	0.6284	0.2317
7	0.1413	0.0441	0.0203	0.5754	0.4374	0.1430	0.6463	0.6637	0.2403
8	0.1259	0.0499	0.0217	0.5929	0.4681	0.1583	0.6771	0.6954	0.2481
9	0.1139	0.0553	0.0230	0.6068	0.4991	0.1723	0.7079	0.7266	0.2574
10	0.1052	0.0603	0.0242	0.6210	0.5304	0.1852	0.7398	0.7598	0.2683
Cholesky Ordering: LOP, RGOEX, and LEX

Figure 4. Responses of RGOEX_t, LEX_t to symmetric oil price shocks LOP_t.