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Determining the asymmetric effects of oil price changes on macroeconomic variables: a case study of Turkey

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Abstract

This paper aims to investigate the effects of unanticipated oil price changes on the Turkish economy using quarterly gross domestic product (GDP) and monthly consumer price index (CPI) and real exchange rate (RER) for the period 2002–2013 . While the bulk of previous studies have employed the standard methodology without true data generating process knowledge, in this study asymmetric Vector Autoregressive methodology proposed by Kilian and Vigfusson (Quant Econ 2(3): 419–453, 2011) is used to analyze the asymmetric impact of oil prices on macroeconomic aggregates. This method allows the researcher to investigate the asymmetric effects of innovations in oil prices on variables without knowing data generating process is linear or not. Empirical findings that, the oil prices changes have asymmetric effects on CPI and RER at one standard deviation shocks in different periods unlike GDP. These asymmetric effects are also statistically significant at 10 % significance level. Specifically, when oil price increases, CPI and RER increases but GDP decreases in the long term.

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Notes

  1. The asymmetric effect can be defined as increases and decreases in any variable do not have same effect on any variable or economy.

  2. There is a literature on the symmetric impacts of oil prices on macroeconomic aggregates for Turkey. See, for example, Alper and Torul 2008; Berument and Taşçı 2002; Diboglu and Kibritcioglu 2003; Kibritcioglu 2003; Özlale and Pekkurnaz 2010; Yaylali and Lebe 2012, Gökçe 2013).

  3. The data of brent oil price, gross domestic product and consumer price, real effective exchange rate are obtained from International Energy Agency: http://www.iea.org., The Central Bank of the Republic of Turkey: http://evds.tcmb.gov.tr/, respectively.

  4. Akaike Information Criteria (AIC) is used to determine the optimal lag lengths of the model; the lag order was 6 for GDP, 2 for CPI and 6 for RER.

  5. We also consider at 90 % confidence levels. However, our results are almost same at both confidence levels.

  6. Since the data of GDP is quarterly, the periods of impulse responses are taken for 1.5 year.

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Authors and Affiliations

  1. Department of Econometrics, Gazi University, 06500, Ankara, Turkey

    Yeliz Yalcin, Cengiz Arikan & Furkan Emirmahmutoglu

  2. Turkish Ministry of Customs and Trade, Ankara, Turkey

    Cengiz Arikan

Authors
  1. Yeliz Yalcin
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  2. Cengiz Arikan
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  3. Furkan Emirmahmutoglu
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Correspondence to Furkan Emirmahmutoglu.

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Yalcin, Y., Arikan, C. & Emirmahmutoglu, F. Determining the asymmetric effects of oil price changes on macroeconomic variables: a case study of Turkey. Empirica 42, 737–746 (2015). https://doi.org/10.1007/s10663-014-9274-y

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