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Nonlinearities in the response of real GDP to oil price shocks

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  • Karaki, Mohamad B.

Abstract

This paper re-examines whether real GDP growth responds asymmetrically to real oil price increases and decreases using a sample that includes the recent oil price declines. I follow Kilian and Vigfusson (2011a) and conduct a test of symmetry. I find no evidence against the null of symmetry using the 3-year net oil price increase specification. Moreover, I find that the results are not stable for different nonlinear transformations of the real price of oil. Finally, evidence of asymmetry vanishes after computing specification robust critical values.

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  • Karaki, Mohamad B., 2017. "Nonlinearities in the response of real GDP to oil price shocks," Economics Letters, Elsevier, vol. 161(C), pages 146-148.
    • Handle: RePEc:eee:ecolet:v:161:y:2017:i:c:p:146-148
    DOI: 10.1016/j.econlet.2017.09.034
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    References listed on IDEAS

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    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    2. Kilian, Lutz & Vigfusson, Robert J., 2011. "Nonlinearities In The Oil Price–Output Relationship," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 337-363, November.
    3. Herrera, Ana María & Lagalo, Latika Gupta & Wada, Tatsuma, 2011. "Oil Price Shocks And Industrial Production: Is The Relationship Linear?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 472-497, November.
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    8. Lutz Kilian & Robert J. Vigfusson, 2011. "Are the responses of the U.S. economy asymmetric in energy price increases and decreases?," Quantitative Economics, Econometric Society, vol. 2(3), pages 419-453, November.
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    More about this item

    Keywords

    Asymmetry; Business cycles; Oil prices; Net oil price;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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