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The Asymmetric Effect of Oil Price on Growth across US States

Author

Listed:
  • Nicholas Apergis

    (School of Economics and Finance, Curtin University, Perth, Australia)

  • Alper Aslan

    (Nevsehir Haci Bektas Veli University,Faculty of Economics and Administrative Sciences,50300, Nevsehir, Turkey)

  • Goodness C. Aye

    (Department of Economics, University of Pretoria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

Abstract

This paper investigates the dynamic relationship between oil prices and growth across the U.S. States using a panel data framework. We use both annual and quarterly data spanning the periods 1973 to 2013 and 1948Q1 to 2013Q4, respectively. Following Hatemi-J (2012), we allow for the presence of asymmetry in the cointegration and causality testing by decomposing oil prices into cumulative sums of positive and negative oil prices. The null hypothesis of no cointegration is rejected. The long-run coefficients are found to be statistically significant across all empirical models, with positive oil prices reducing output, while negative oil prices increasing output. We also find evidence of both short- and long-run bidirectional causality between aggregate oil prices and output. However, there is evidence of unidirectional causality both from positive and negative oil prices to output based on annual data. The quarterly data generated slightly different result, indicating both long- and short-run bidirectional causality between positive and negative oil prices and output.

Suggested Citation

  • Nicholas Apergis & Alper Aslan & Goodness C. Aye & Rangan Gupta, 2014. "The Asymmetric Effect of Oil Price on Growth across US States," Working Papers 201459, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201459
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    More about this item

    Keywords

    Oil prices; economic growth; asymmetric effects; US States;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O00 - Economic Development, Innovation, Technological Change, and Growth - - General - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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