Trade Linkages and Transmission of Oil Price Fluctuations in a Model Incorporating Monetary Variables

Farhad Taghizadeh-Hesary (), Ehsan Rasoulinezhad and Naoyuki Yoshino ()
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Ehsan Rasoulinezhad: Asian Development Bank Institute

No 777, ADBI Working Papers from Asian Development Bank Institute

Abstract: We attempt to ascertain how sharp oil price changes can affect oil-exporting and oil-importing economies. To this end, we applied a simultaneous equation model (SEM) through a weighted two-stage least squares estimation method to different countries with business relations from Q1 2000 to Q4 2015. In the case of oil-exporting countries—Iran, the Russian Federation, United Arab Emirates, Indonesia, and Kazakhstan—our findings revealed that they totally benefit from oil price increases. In the case of oil-importing countries, the effects are more diverse. To derive a better interpretation, we divided them into four groups: European Union (EU) members (Germany, Italy, the Netherlands, and Poland); East Asian economies (Japan; the People’s Republic of China; the Republic of Korea; Viet Nam; Taipei,China; Singapore; and Hong Kong, China); Commonwealth of Independent States (Ukraine and Belarus); and others (United States, India, and Turkey). Our results showed that all these countries importing oil face a negative supply shock, except Turkey, which benefits directly from an oil price shock. Furthermore, the indirect effect coefficient received through trade for all these countries was positive.

Keywords: crude oil price; trade linkage; direct and indirect effect of oil shocks (search for similar items in EconPapers)
JEL-codes: C30 E32 Q43 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2017-09-07
New Economics Papers: this item is included in nep-cis, nep-ene, nep-int, nep-mac and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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