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Factors Affecting an Economy’s Tolerance and Delay of Response to the Impact of a Positive Oil Price Shock

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  • Bwo-Nung Huang

Abstract

This paper applies a multivariate threshold model to estimate a country’s threshold level of economic tolerance (c) and delay of response (d) to the impact of a positive price change and its shock. Regression analysis is employed to investigate the factors affecting c and d. We find: (1) as a country becomes more advanced in economic development and acquires a lower ratio of energy use in its industry and transportation sectors, the threshold of tolerance is greater as evidenced by the positive impact of an oil price change and its shock; (2) if a country has a lower ratio of energy use in the industry sector, a lower energy import ratio and is more advanced in economic development, it will have a longer delay; and (3) as an economy becomes more advanced, the length of the response time from the impact of the shock of an oil price change will be longer.

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  • Bwo-Nung Huang, 2008. "Factors Affecting an Economy’s Tolerance and Delay of Response to the Impact of a Positive Oil Price Shock," The Energy Journal, , vol. 29(4), pages 1-34, October.
    • Handle: RePEc:sae:enejou:v:29:y:2008:i:4:p:1-34
    DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-1
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    3. Burbidge, John & Harrison, Alan, 1984. "Testing for the Effects of Oil-Price Rises Using Vector Autoregressions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 459-484, June.
    4. Hamilton, James D & Herrera, Ana Maria, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 265-286, April.
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