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Oil price shocks and trade imbalances

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  • Le, Thai-Ha
  • Chang, Youngho

Abstract

This study aims to examine whether a large part of the variability of trade balances and their oil and non-oil components is associated with oil price fluctuations. The long-run causality running from oil price to overall, oil and non-oil trade balances and their short-run dynamics are investigated by applying the Toda and Yamamoto, 1995 (TY) causality approach and generalized impulse response functions (IRFs), respectively to the monthly data spanning from January 1999 to November 2011. Three Asian economies that represent three distinct characteristics in terms of oil are chosen and examined: Malaysia as an oil exporter, Singapore as an oil refinery and Japan as an oil importer. The stability of the causality is also checked and the estimated impulse responses across different periods are examined. The results have implications for both policy makers and economic modeling of the impact of oil price shocks.

Suggested Citation

  • Le, Thai-Ha & Chang, Youngho, 2013. "Oil price shocks and trade imbalances," Energy Economics, Elsevier, vol. 36(C), pages 78-96.
    • Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:78-96
    DOI: 10.1016/j.eneco.2012.12.002
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    More about this item

    Keywords

    Oil price shock; Trade balance; VAR; Granger non-causality test; Gregory-Hansen cointegration test;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East

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