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Macroeconomic impacts of oil price shocks in Asian economies

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  • Cunado, Juncal
  • Jo, Soojin
  • Perez de Gracia, Fernando

Abstract

This paper analyzes the macroeconomic impact of structural oil shocks in four of the top oil-consuming Asian economies, using a VAR model. We identify three different structural oil shocks via sign restrictions: an oil supply shock, an oil demand shock driven by global economic activity and an oil-specific demand shock. The main results suggest that economic activity and prices respond very differently to oil price shocks depending on their types. In particular, an oil supply shock has a limited impact, while a demand shock driven by global economic activity has a significant positive effect in all four Asian countries examined. Our finding also includes that policy tools such as interest rates and exchange rates help mitigating the effects of supply shocks in Japan and Korea; however, they can be more actively used in response to demands shocks.

Suggested Citation

  • Cunado, Juncal & Jo, Soojin & Perez de Gracia, Fernando, 2015. "Macroeconomic impacts of oil price shocks in Asian economies," Energy Policy, Elsevier, vol. 86(C), pages 867-879.
    • Handle: RePEc:eee:enepol:v:86:y:2015:i:c:p:867-879
    DOI: 10.1016/j.enpol.2015.05.004
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    More about this item

    Keywords

    Structural oil shocks; Macroeconomy; Sign restrictions; Asian economies; SVAR models.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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