The Asymmetric Effect of Oil Price on Growth across US States

Nicholas Apergis (), Alper Aslan, Goodness Aye () and Rangan Gupta
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Goodness Aye: Department of Economics, University of Pretoria

No 201459, Working Papers from University of Pretoria, Department of Economics

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.

Keywords: Oil prices; economic growth; asymmetric effects; US States (search for similar items in EconPapers)
JEL-codes: C33 O00 Q41 R10 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-10
New Economics Papers: this item is included in nep-ene and nep-gro
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201459

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