Essays on the oil price volatility implications on macroeconomics and corporate finance

This thesis investigates how volatility in crude oil prices affects both national economies and corporate financial decisions. It centres on two main aspects: macroeconomic impacts, such as shifts in trade balances, exchange rates, and monetary policy, and firm-level financial challenges, including the role of Environmental, Social, and Governance (ESG) practices as a buffer against crude oil market uncertainty. By analysing data from both oil-exporting and oil-importing countries, the research uncovers patterns of currency adjustments, inflationary pressures, and policy rate shifts triggered by oil price shocks. Unexpectedly, exporters and importers often display comparable responses, suggesting that high volatility prompts uniform caution rather than starkly divergent strategies. Shifting to corporate finance, the thesis examines how companies with robust ESG scores can mitigate risks tied to crude oil fluctuations. Findings reveal that while ESG commitments can sometimes dampen immediate returns, they act as a powerful hedge when volatility crosses critical thresholds. Furthermore, ESG-strong firms not only shield themselves against heightened oil price swings but can also secure lower borrowing costs, signalling reduced risk to lenders. By uniting macro-level analysis with firm-specific insights, this work contributes to a deeper understanding of oil market fluctuations. Policymakers and business leaders may leverage these findings to devise strategies that foster greater stability, resilience, and sustainable growth during periods of heightened volatility stemming from the crude oil market.