Non-linearities in the dynamics of oil prices
AbstractWe utilize non-linear models to examine the stationarity of oil prices (Brent, Dubai, WIT and World) over the period 1973:2-2011:2. Real oil prices are calculated and expressed in the domestic currencies of seven Asian countries (Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore and Thailand) and in the U.S dollar. Applying linear unit root tests with and without structural breaks shows very limited evidence of stationarity. However, applying non-linear models shows evidence of non-linearity in all the cases. In most cases, we find significant evidence of exponential smooth transition autoregression (ESTAR) type non-linearity. Notably, the results for Japan suggest logistic (LSTAR) type non-linearity for the four oil prices. Applying unit root tests, which account for two types of non-linearities (smooth transition and nonlinear deterministic trends), reveals evidence of stationarity in all the cases.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36586.
Date of creation: 08 Feb 2012
Date of revision:
oil prices; nonlinear unit root tests; nonlinear deterministic trends; smooth transition autoregression;
Other versions of this item:
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-ENE-2012-02-20 (Energy Economics)
- NEP-SEA-2012-02-20 (South East Asia)
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