Trade linkages and transmission of oil price fluctuations

Farhad Taghizadeh-Hesary (), Naoyuki Yoshino (), Ehsan Rasoulinezhad and Youngho Chang ()

Energy Policy, 2019, vol. 133, issue C

Abstract: This study is an attempt to ascertain how oil price shock can affect a trade-linked system via monetary variables. To this end, a simultaneous equation model (SEM) was applied through a Weighted Two Stage Least Squares (W2SLS) estimation method to different countries (21 cases) with business relations over the period from Q1 2000 to Q4 2015. In the case of oil-exporting countries—consisting of Iran, Russian Federation, UAE, Indonesia, and Kazakhstan—the 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 and South East Asian nations (Japan; People's Republic of China; Republic of Korea; Viet Nam; Taipei China; Singapore; and Hong Kong, China); Commonwealth of Independent States (CIS) (Ukraine and Belarus) and others (the United States, India, and Turkey). The results showed that all these countries importing oil face a negative supply shock. Furthermore, the indirect effect coefficient almost 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)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:133:y:2019:i:c:s0301421519304501

DOI: 10.1016/j.enpol.2019.07.008

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