Oil price uncertainty and manufacturing production

Goodness C. Aye, Vincent Dadam, Rangan Gupta and Bonginkosi Mamba

Energy Economics, 2014, vol. 43, issue C, 41-47

Abstract: Given the rapid rise and volatility of oil prices, the paper investigates the effect of oil price uncertainty on the South African manufacturing production using monthly observations covering the period 1974:02 to 2012:12. In addition, we quantify the responses of manufacturing production to positive and negative oil price shocks. We examine the dynamic relationship using a bivariate GARCH-in-mean VAR simultaneously estimated with a full information maximum likelihood technique. The conditional standard deviation of the forecast of the growth of US crude oil imported acquisition cost by refiners is used as a measure of oil price uncertainty. Our results show that oil price uncertainty negatively and significantly impacts on South Africa's manufacturing production. We also find that the responses of manufacturing production to positive and negative shocks are asymmetric.

Keywords: Oil volatility; Vector autoregression; Bivariate GARCH-in-mean VAR; Manufacturing production (search for similar items in EconPapers)
JEL-codes: C32 D24 E23 E32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:43:y:2014:i:c:p:41-47

DOI: 10.1016/j.eneco.2014.02.004

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