is New Zealand's economy vulnerable to world oil market shocks?

Mohammad Jaforullah () and Alan King ()
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Mohammad Jaforullah: Department of Economics, University of Otago, New Zealand
Alan King: Department of Economics, University of Otago, New Zealand

No 1503, Working Papers from University of Otago, Department of Economics

Abstract: We assess New Zealand’s vulnerability to oil shocks by estimating its price and income elasticities of demand for imported oil and by testing. For Granger causality between oil imports, their price and GDP. Based on data for the period 1987Q2–2012Q4, we find the short-run price and income elasticities to be statistically insignificant. However, the long-run price and income elasticity estimates are significant and equal to −0.34 and 1.61, respectively. We also find that oil imports, and to some extent oil prices, Granger-cause real GDP, indicating that the New Zealand economy is vulnerable to shocks in the world oil market.

Keywords: Oil imports; Price elasticity; Income elasticity; Granger causality; Cointegration; Vector error correction model (search for similar items in EconPapers)
JEL-codes: C32 Q41 Q43 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-03, Revised 2015-03
New Economics Papers: this item is included in nep-ene
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http://www.otago.ac.nz/economics/otago089971.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:otg:wpaper:1503

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