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Direct and Indirect Impacts of Oil Price Shocks on Ecuador’s Economic Cycles (2000:01-2020:01)

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  • Fernando Martin-Mayoral
  • Alexander Carvajal

Abstract

We analyse the non-linear relationship between oil price shocks and the real business cycle in Ecuador, a dollarized economy where oil exports are the country’s main source of foreign exchange. We estimate several autoregressive Markov switching models for the period 2000:01-2020:01 to identify the differentiated impact of nominal oil price shocks on real GDP in expansion and slowdown regimes. We find evidence that oil price shocks have an asymmetric effect on Ecuador’s economic growth, with a larger impact during slowdowns. They also affect all components of aggregate demand differently in each regime, with a larger impact on investment during expansions.

Suggested Citation

  • Fernando Martin-Mayoral & Alexander Carvajal, 2023. "Direct and Indirect Impacts of Oil Price Shocks on Ecuador’s Economic Cycles (2000:01-2020:01)," Estudios de Economia, University of Chile, Department of Economics, vol. 50(2 Year 20), pages 379-412, December.
    • Handle: RePEc:udc:esteco:v:50:y:2023:i:2:p:379-412
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    More about this item

    Keywords

    Business cycle; Oil prices; Nonlinear models; Markov Re-gime-Switching Model; Ecuador.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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