The Impact of Economic Growth in Selected OPEC Countries from Shocks in Monetary Policy Uncertainty Index and Growth of Major Economies Using the Panel MIDAS-VAR Approach
Keywords:
Economic Uncertainty, Monetary Policy Uncertainty, Economic Growth, JEL Classification, E32, E44, E52Abstract
Recent global events, including the financial crisis of past years, regional trade tensions, and the COVID-19 pandemic, have significantly increased uncertainty regarding the efficiency and effectiveness of economic policies, such that studies indicate these uncertainties have substantial adverse effects on macroeconomic performance. This study aimed to examine the effects of monetary policy and global economic uncertainties on the economic growth of OPEC member countries (Iran, Iraq, and Saudi Arabia). The data were analyzed as an unbalanced panel combining different frequencies (annual and quarterly) using the VAR-MIDAS approach. The results of the unit root tests showed that most variables are stationary at level, and only the monetary policy uncertainty variable required differencing. The results of the Impulse Response Functions (IRFs) indicated that quarterly shocks in the Economic Policy Uncertainty (EPU) index from the economies of China, the United States, and the European Union had significant effects on the annual economic growth of OPEC countries, such that the responses were highly seasonal, ranging from initial positive peaks (2 to 5 units) to gradual returns to baseline or even negative ranges in subsequent quarters. In particular, spring shocks generated an initial positive impact but rapidly adjusted, summer shocks created strong increases followed by short-term negative reversals, and winter shocks induced contrasting fluctuations (from positive to negative) on the panel’s economic growth. Furthermore, the results showed that quarterly economic growth shocks in major economies (GR) also had a considerable impact on OPEC growth, especially in spring and summer, when the channel of declining or rising oil demand plays a key role. The initial response of OPEC growth to monetary policy shocks was negative (a decrease of about 0.2 units), indicating the high sensitivity of these countries to unexpected changes in global monetary policies; however, the effects adjusted in the medium term and returned to the equilibrium level. Overall, the results obtained from the VAR-MIDAS model showed that the effects of economic and policy uncertainties on OPEC growth are short-term, seasonal, and nonlinear, and their intensity and direction depend on the nature of the shock and the season in which it occurs.
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Copyright (c) 2025 Mohammed Basim Ahmed (Corresponding author); Jafar Haghighat, Mohammad Reza Salmani Bishak, Zahra Karimi Takanlou (Author)
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