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Estimating the effects of global oil market shocks on Australian merchandise trade

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  • Sotoudeh, M-Ali
  • Worthington, Andrew C.

Abstract

In this paper, we examine the dynamic responses of Australian merchandise trade to global oil market structural shocks. The analysis employs monthly data over the period June 1986 to January 2013 and vector generalized autoregressive conditional heteroscedasticity (VGARCH), structural vector autoregression (SVAR), and parametric nonlinear models. We find that an increase in the oil price driven by shocks in global economic activity exerts a significant influence on Australian merchandise exports, and thereby merchandise trade as a whole, for periods of more than one year. However, the responses of merchandise imports to oil price shocks are more modest and persist for only a few months. Finally, uncertainty in future global oil prices, as measured by volatility in the 3-month-ahead price, strongly and negatively affects Australian international commodity markets.

Suggested Citation

  • Sotoudeh, M-Ali & Worthington, Andrew C., 2016. "Estimating the effects of global oil market shocks on Australian merchandise trade," Economic Analysis and Policy, Elsevier, vol. 50(C), pages 74-84.
    • Handle: RePEc:eee:ecanpo:v:50:y:2016:i:c:p:74-84
    DOI: 10.1016/j.eap.2016.02.006
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    2. Wei, Yanfeng, 2019. "Oil price shocks, economic policy uncertainty and China’s trade: A quantitative structural analysis," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 20-31.
    3. Garg, Bhavesh & Prabheesh, K.P., 2017. "Drivers of India’s current account deficits, with implications for ameliorating them," Journal of Asian Economics, Elsevier, vol. 51(C), pages 23-32.
    4. Chang, Lei & Mohsin, Muhammad & Gao, Zhennan & Taghizadeh-Hesary, Farhad, 2023. "Asymmetric impact of oil price on current account balance: Evidence from oil importing countries," Energy Economics, Elsevier, vol. 123(C).
    5. Wang, Qizhen & Zhu, Yingming & Wang, Yudong, 2017. "The effects of oil shocks on export duration of China," Energy, Elsevier, vol. 125(C), pages 55-61.

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    More about this item

    Keywords

    Oil price volatility; Merchandise trade; Structural shocks; Vector generalised autoregressive conditional heteroscedasticity (VGARCH); Structural vector autoregression (SVAR); Australia;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O56 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Oceania

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