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The Dynamic Relationships between Oil Prices and the Japanese Economy: A Frequency Domain Analysis

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  • Wei Yanfeng

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    (Graduate School of Social Sciences, Hiroshima University, JAPAN)

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    Abstract

    This paper investigates the dynamic relationships between oil prices and the Japanese economy from a frequency domain perspective. Both the frequency domain causality test of Breitung and Candelon (2006) and the frequency dependent regression method developed by Ashley and Verbrugge (2009) are deployed in this research. The frequency dependent regression analysis indicates that nonlinear relationships exist between oil prices and the variables such as industrial production and consumer price index at the low frequencies, while the nonlinear associations at the high frequencies are merely detected between oil prices and unemployment rates. The results of the frequency domain causality tests suggest that oil prices have significant predictive power for industrial production, consumer price index and unemployment rates at the low frequencies. In addition, oil prices can predict industrial production and unemployment rates at some higher frequencies.

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    Bibliographic Info

    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 3 (2013)
    Issue (Month): (May)
    Pages: 57-67

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    Handle: RePEc:bap:journl:130205

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    Related research

    Keywords: Oil price; Frequency dependent regression; Frequency domain causality;

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    References

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    6. Assenmacher-Wesche, Katrin & Gerlach, Stefan & Sekine, Toshitaka, 2007. "Monetary factors and inflation in Japan," IMFS Working Paper Series, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt 13, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
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    15. Richard Ashley & Randal Verbrugge, 2009. "Frequency Dependence in Regression Model Coefficients: An Alternative Approach for Modeling Nonlinear Dynamic Relationships in Time Series," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 28(1-3), pages 4-20.
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    17. Michael M. Hutchison, 1992. "Structural change and the macroeconomic effects of oil shocks: empirical evidence from the United States and Japan," Pacific Basin Working Paper Series, Federal Reserve Bank of San Francisco 92-06, Federal Reserve Bank of San Francisco.
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