Oil Prices, Production and Inflation in the Selected EU Countries: Threshold Cointegration Approach

Andrzej Geise () and Mariola Pilatowska ()
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Andrzej Geise: Nicolaus Copernicus University

Dynamic Econometric Models, 2014, vol. 14, 71-91

Abstract: This paper applies the threshold cointegration technique developed by Enders and Siklos (2001) to investigate the impact of an oil price changes on changes in production and inflation in the presence of structural break in seven European Union countries. This technique will allow for a different speed of adjustment to the long-run equilibrium depending on whether production in selected economies is above or below the long-run relationship. Given the presence of asymmetric cointegration between oil prices, production and inflation, we estimate threshold error correction models to examine long- and short-run Granger causality. We found evidence for cointegration with asymmetric adjustment in the case of France, Denmark and the total EU.

Keywords: asymmetric adjustment; oil price shocks; threshold cointegration; non-linearity; threshold error correction model (search for similar items in EconPapers)
JEL-codes: C32 E23 E32 Q43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cpn:umkdem:v:14:y:2014:p:71-91

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