Oil Prices, Macroeconomic Performance, and Sustainability

Abstract

This chapter examines the effect of oil prices on selected macroeconomic variables such as economic growth, inflation, interest rate, unemployment, and import in Turkey. Johansen cointegration and vector error correction model (VECM) were used for yearly data from 1990 to 2020. According to the findings, the rise in oil prices in the short term has a positive impact on unemployment and economic growth, which are among the selected variables. However, it is observed that a rise in oil prices in the long term has an unstable volatile effect on selected macroeconomic variables. It is recommended that Turkey (which is a developing oil-dependent country and where macroeconomic variables are vulnerable to oil shocks) should spread its oil providers, focus on domestic energy resources, develop advanced technology to raise the usage of renewable energy resources, and implement energy-saving policies.