Advertisement

Crude Oil Price Shocks and Macroeconomic Performances in the ASEAN Economies

  • Giray GozgorEmail author
  • Youngho Chang
  • Mehmet Huseyin Bilgin
Conference paper
Part of the Eurasian Studies in Business and Economics book series (EBES, volume 4)

Abstract

This paper examines the relationship between the crude oil price shocks and the macroeconomic performance in the panel data set of 10 ASEAN economies: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, over the period 1970–2013. We implement a second-generation panel unit root test, the panel cointegration analysis, accounting for multiple structural breaks, the panel dynamic ordinary least squares (PDOLS) estimations, and the panel-causality test in sequence. The empirical findings imply that there is only a statistically significant cointegration between the crude oil prices and the real GDP per capita levels. The results of the panel-causality test also indicate that there is a significant pairwise causal relationship between the levels of crude oil price and the real GDP per capita. In addition, the results of the PDOLS estimations indicate that 10 % increase in the crude oil price leads to 1.8 % increase in the real GDP per capita in the ASEAN economies in general. Running the common correlated effects panel estimations, we obtain the coefficients for each country and observe that the significant and positive effects are valid in 7 of 10 countries.

Keywords

Crude oil price shocks Income Unemployment Inflation Domestic credits ASEAN economies Panel data estimation techniques 

References

  1. Bai, J., & Perron, P. (1998). Estimating and testing linear models with multiple structural changes. Econometrica, 66(1), 47–78.CrossRefGoogle Scholar
  2. Bilgin, M. H., Gozgor, G., & Karabulut, G. (2015). The impact of world energy price volatility on aggregate economic activity in developing Asian economies. Singapore Economic Review, 60(1), 1550009.CrossRefGoogle Scholar
  3. Brown, S. P., & Yucel, M. K. (2002). Energy prices and aggregate economic activity: An interpretative survey. Quarterly Review of Economics and Finance, 42(2), 193–208.CrossRefGoogle Scholar
  4. Bruno, M., & Sachs, J. (1982). Input price shocks and the slowdown in economic growth: The case of UK manufacturing. Review of Economic Studies, 49(5), 679–705.CrossRefGoogle Scholar
  5. Chang, Y., Jha, K., Fernandez, K. M., & Jam’an, N. F. (2011). Oil price fluctuations and macroeconomic performances in Asian and Oceanic economies. Proceedings of 30th United States Association for Energy Economics/International Association for Energy Economics North American Conference, Washington, DC, October 9–12, 2011.Google Scholar
  6. Cologni, A., & Manera, M. (2008). Oil prices, inflation and interest rates in a structural cointegrated VAR model for the G-7 Countries. Energy Economics, 30(3), 856–888.CrossRefGoogle Scholar
  7. Du, L., He, Y., & Wei, C. (2010). The relationship between oil price shocks and China’s macroeconomy: An empirical analysis. Energy Policy, 38(8), 4142–4151.CrossRefGoogle Scholar
  8. Dumitrescu, E. I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modeling, 29(4), 1450–1460.CrossRefGoogle Scholar
  9. Gisser, M., & Goodwin, T. H. (1986). Crude oil and the macroeconomy: Tests of some popular notions: Note. Journal of Money, Credit and Banking, 18(1), 95–103.CrossRefGoogle Scholar
  10. Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of Political Economy, 91(2), 228–248.CrossRefGoogle Scholar
  11. Hamilton, J. D. (1985). Historical causes of postwar oil shocks and recessions. Energy Journal, 6(1), 97–116.CrossRefGoogle Scholar
  12. Hamilton, J. D. (1996). This is what happened to the oil price-macroeconomy relationship. Journal of Monetary Economics, 38(2), 215–220.CrossRefGoogle Scholar
  13. Hooker, M. A. (1996). What happened to the oil price-macroeconomy relationship? Journal of Monetary Economics, 38(2), 195–213.CrossRefGoogle Scholar
  14. Huang, B. N., Hwang, M. J., & Peng, H.-P. (2005). The asymmetry of the impact of oil price shocks on economic activities: An application of the multivariate threshold model. Energy Economics, 27(3), 455–476.CrossRefGoogle Scholar
  15. Kao, C., & Chiang, M. H. (2000). On the estimation and inference of a cointegrated regression in panel data. In B. H. Baltagi (Ed.), Nonstationary panels, panel cointegration and dynamic panels (Vol. 15, pp. 179–222). Elsevier: Amsterdam.CrossRefGoogle Scholar
  16. Lardic, S., & Mignon, R. (2006). The impact of oil prices on GDP in European countries: An empirical investigation based on asymmetric cointegration. Energy Policy, 34(18), 3910–3915.CrossRefGoogle Scholar
  17. Lardic, S., & Mignon, R. (2008). Oil prices and economic activity: An asymmetric cointegration approach. Energy Economics, 30(3), 847–855.CrossRefGoogle Scholar
  18. Lau, M. C. K., Su, Y., Tan, N., & Zhang, Z. (2014). Hedging China’s energy oil market risks. Eurasian Economic Review, 4(1), 99–112.CrossRefGoogle Scholar
  19. LeBlanc, M., & Chinn, M. D. (2004). Do high oil prices presage inflation? The evidence from G5 countries. Business Economics, 34(2), 38–48.Google Scholar
  20. Lee, K., & Ni, S. (2002). On the dynamic effects of oil price shock: A study using industry level data. Journal of Monetary Economics, 49(4), 823–852.CrossRefGoogle Scholar
  21. Lee, K., Ni, S., & Ratti, R. A. (1995). Oil shocks and the macroeconomy: The role of price variability. Energy Journal, 16(4), 39–56.CrossRefGoogle Scholar
  22. Mark, N. C., & Sul, D. (2003). Cointegration vector estimation by panel DOLS and long-run money demand. Oxford Bulletin of Economics and Statistics, 65(5), 655–680.CrossRefGoogle Scholar
  23. Mork, K. A. (1989). Oil and the macro-economy, when prices go up and down: An extension of Hamilton’s results. Journal of Political Economy, 97(3), 740–744.CrossRefGoogle Scholar
  24. Mork, K. A. (1994). Business cycles and the oil market. Energy Journal, 15(S), 15–38.Google Scholar
  25. Mork, K. A., Mysen, H. T., & Olsen, O. (1994). Macroeconomic responses to oil price increases and decreases in seven OECD countries. Energy Journal, 15(4), 19–35.Google Scholar
  26. Peersman, G., & Van Robays, I. (2012). Cross-country differences in the effects of oil shocks. Energy Economics, 34(5), 1532–1547.CrossRefGoogle Scholar
  27. Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. IZA Discussion Paper Series, No. 1240.Google Scholar
  28. Pesaran, M. H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica, 74(4), 967–1012.CrossRefGoogle Scholar
  29. Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22(2), 265–312.CrossRefGoogle Scholar
  30. Pesaran, M. H., & Tosetti, E. (2011). Large panels with common factors and spatial correlation. Journal of Econometrics, 161(2), 182–202.CrossRefGoogle Scholar
  31. Tang, W., Wu, L., & Zhang, Z. (2010). Oil price shocks and their short and long-term effects on the Chinese economy. Energy Economics, 32(S1), 3–14.CrossRefGoogle Scholar
  32. Westerlund, J. (2006). Testing for panel cointegration with multiple structural breaks. Oxford Bulletin of Economics and Statistics, 68(1), 101–132.CrossRefGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2017

Authors and Affiliations

  • Giray Gozgor
    • 1
    Email author
  • Youngho Chang
    • 2
  • Mehmet Huseyin Bilgin
    • 1
  1. 1.Faculty of Political SciencesIstanbul Medeniyet UniversityIstanbulTurkey
  2. 2.Department of EconomicsNanyang Technological UniversitySingaporeSingapore

Personalised recommendations