Investigating the dynamic connectedness between oil consumption and industrialization in the Mena region using TVP-VAR model

Abstract

Post the industrial revolution, with so much energy being demanded to facilitate powering engines, machines, and production lines, oil and natural gas emerged and positioned themselves as global market movers and leaders. Countries of the MENA region have long been on a setback due to frequent instabilities and therefore have not taken lead in any global industry. This lag in advancement could be attributed to many economic conditions; the low “Manufacturing Value Added” (MVA), used interchangeably with “Industrial Value Added (IVA)”, is an indicator of the net output and overall economic status considering that the Manufacturing sector is of the high energy consuming sectors. The aim of the thesis is to analyze the dynamics between crude oil consumption and MVA in the MENA region from 1960 to 2021, using the Time-Varying Parameter Vector Autoregression (TVP-VAR) model perspective to identify the key areas of research for future studies. Ultimately, the thesis aims to provide insights that will help policy makers make informed decisions and set better regulations to improve the economies that lag behind in the MENA region.