The Nexus Between Oil Prices and Current Account Deficit: An Empirical Analysis for Lebanon

Abstract

This study examines the impact of short and long-term oil prices on Lebanon's current account deficit during the period of 2002 to 2008, utilizing monthly data. The investigation employs the Johansen Cointegration Test to explore the relationships between the variables. The Johansen Cointegration Test establishes a long-term connection between the series, indicating a sustained relationship. To delve into the short-term dynamics, we utilize the Vector Error Correction Model (VECM). The results of this model reveal a negative and statistically significant error correction term. This suggests that any short-term deviations from equilibrium are expected to revert in the long run.