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The Influence of Oil Prices on an Oil-Importing Developing Economy

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  • Fakhraddin Maroofi

    ()
    (University of Kurdistan)

  • Parviz Kafchehi

    ()
    (University of Kurdistan)

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    Abstract

    This research examines the influence of an increase in the price of oil on a developing economy. We consider the area to which the influences of oil price revelation depend upon the economy's internal production structure and its approach to the world financial market, and find that the long-run influence depends more on the earlier than the latter. Two unfavorable quantities which the long-run effects are (i) the relative share of oil to labor in production and (ii) the elasticity of replacement in production. We increase the unapproachable examination with numbers pretends, thereby allowing us to distinguish the short-run actives. In general, the affections can replicate much of the empirical evidence used to distinguish the effects of the recent oil price increases on the economy. They also focus the responsiveness of the effect of the oil price to the elasticity of replacement.

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    Bibliographic Info

    Article provided by Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences in its journal International Journal of Academic Research in Accounting, Finance and Management Sciences.

    Volume (Year): 2 (2012)
    Issue (Month): 4 (October)
    Pages: 66-82

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    Handle: RePEc:hur:ijaraf:v:2:y:2012:i:4:p:66-82

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    Web page: http://hrmars.com/index.php/pages/detail/Accounting-Finance-Journal

    Related research

    Keywords: Oil price; Actives; Developing economy;

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    References

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    1. International Monetary Fund, 2007. "Oil Shocks and External Balances," IMF Working Papers 07/110, International Monetary Fund.
    2. Sebastian Edwards, 1984. "LDC's Foreign Borrowing and Default Risk: An Empirical Investigation," NBER Working Papers 1172, National Bureau of Economic Research, Inc.
    3. Anton Nakov & Andrea Pescatori, 2010. "Oil and the Great Moderation," Economic Journal, Royal Economic Society, vol. 120(543), pages 131-156, 03.
    4. Martin Bodenstein & Christopher J. Erceg & Luca Guerrieri, 2007. "Oil shocks and external adjustment," International Finance Discussion Papers 897, Board of Governors of the Federal Reserve System (U.S.).
    5. James D. Hamilton, 2000. "What is an Oil Shock?," NBER Working Papers 7755, National Bureau of Economic Research, Inc.
    6. Rajeev Dhawan & Karsten Jeske, 2006. "How resilient is the modern economy to energy price shocks?," Economic Review, Federal Reserve Bank of Atlanta, issue Q 3, pages 21-32.
    7. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
    8. Andrew Atkeson & Patrick J. Kehoe, 1994. "Models of Energy Use: Putty-Putty versus Putty-Clay," NBER Working Papers 4833, National Bureau of Economic Research, Inc.
    9. Edda Zoli, 2004. "Credit Rationing in Emerging Economies' Access to Global Capital Markets," IMF Working Papers 04/70, International Monetary Fund.
    10. Backus, David K. & Crucini, Mario J., 2000. "Oil prices and the terms of trade," Journal of International Economics, Elsevier, vol. 50(1), pages 185-213, February.
    11. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-44, June.
    12. Chung, Keunsuk & Turnovsky, Stephen J., 2010. "Foreign debt supply in an imperfect international capital market: Theory and evidence," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 201-223, March.
    13. 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.
    14. Edwards, Sebastian, 1984. "LDC Foreign Borrowing and Default Risk: An Empirical Investigation, 1976-80," American Economic Review, American Economic Association, vol. 74(4), pages 726-34, September.
    15. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    16. Pindyck, Robert S & Rotemberg, Julio J, 1983. "Dynamic Factor Demands and the Effects of Energy Price Shocks," American Economic Review, American Economic Association, vol. 73(5), pages 1066-79, December.
    17. Gupta, Eshita, 2008. "Oil vulnerability index of oil-importing countries," Energy Policy, Elsevier, vol. 36(3), pages 1195-1211, March.
    18. Ibrahim, Ibrahim B. & Hurst, Christopher, 1990. "Estimating energy and oil demand functions : A study of thirteen developing countries," Energy Economics, Elsevier, vol. 12(2), pages 93-102, April.
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