The impact of oil price changes on industrial production: a panel smooth-transition approach on G7 countries

Majid Moayyed and Mehdi Shiva
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Majid Moayyed: University of Dundee

International Economics and Economic Policy, 2023, vol. 20, issue 4, No 4, 595-612

Abstract: Abstract Several studies have investigated the effect of oil price shocks on business cycles, production, prices, and labour market. The focus of this paper is primarily on the relationship between oil price changes and industrial production in G7 countries. To investigate the heterogeneity of impact, this paper investigates the effects of oil price changes based on the threshold role of net oil exports-to-GDP ratio. A panel smooth transition regression model is employed for analysis over two consecutive periods, namely, 1980–1999 and 2000–2017 as well as the combined period of 1980–2017. The results indicate that oil price hikes have a positive (negative) impact on oil-exporting (oil-importing) countries. The impact appears to be different across time periods, with the 1980–1999 sample exhibiting larger negative impact compared to 2000–2017. This hints on the effectiveness of energy diversification strategies employed post-2000 which resulted in lowering dependence on oil.

Keywords: Oil price; Industrial production; Panel smooth transition; G7; Q43; O14; E37 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10368-023-00573-w

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