Oil prices and competitiveness: time series evidence from six oil‐producing countries

Purpose – The purpose of this paper is to study the potential loss of competitiveness due to higher oil prices through the monetary channel in a group of six oil producing countries. Design/methodology/approach – A dynamic time series methodology, Dynamic Simultaneous Equations, is applied to Vector Autoregressive Moving Average model with exogenous variables. Findings – Mixed evidence was found of loss of competitiveness due to high oil prices in the sample. Practical implications – Findings are useful both for academic researchers in international finance or development economics. Policy makers will find the results useful for implementing stabilization or neutralization policies. Originality/value – The empirical work extends earlier research in several directions including extension to six oil‐producing countries, use of data over the flexible exchange rate period, and a more suitable technique, which estimates the model in a dynamic setting.