Advanced Search
MyIDEAS: Login to save this paper or follow this series

International Evidence On The Oil Price-Real Output Relationship: Does Persistence Matter?

Contents:

Author Info

  • Richard A. Ashley
  • Kwok Ping Tsang
Registered author(s):

    Abstract

    The literature on the relationship between real output growth and the growth rate in the price of oil, including an allowance for asymmetry in the impact of oil prices on output, continues to evolve. Here we show that a new technique, which allows us to control for both this asymmetry and also for the persistence of oil price changes, yields results implying that such control is necessary for a statistically adequate specification of the relationship. The new technique also yields an estimated model for the relationship which is more economically interpretable. In particular, using quarterly data from 1976 - 2007 on each of six countries which are essentially net oil importers, we find that changes in the growth rate of oil prices which persist for more than four years have a large and statistically significant impact on future output growth, whereas less persistent changes (lasting more than one year but less than four years) have no significant impact on output growth. In contrast, 'temporary' fluctuations in the oil price growth rate - persisting for only a year or less – again have a large and statistically significant impact on output growth for most of these countries. The results for the single major net oil producer in our sample (Norway) are distinct in an interesting way.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: ftp://repec.econ.vt.edu/Papers/Ashley/ashley_tsang_oil_price.pdf
    File Function: First version, 2013
    Download Restriction: no

    Bibliographic Info

    Paper provided by Virginia Polytechnic Institute and State University, Department of Economics in its series Working Papers with number e07-42.

    as in new window
    Length: 32 pages
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:vpi:wpaper:e07-42

    Contact details of provider:
    Postal: 3016 Pamplin Hall, Blacksburg, VA 24061-0316
    Phone: 540-231-9636
    Fax: 540-231-5097
    Web page: http://www.econ.vt.edu
    More information through EDIRC

    Related research

    Keywords: oil price; frequency dependence; business cycle; nonlinearities;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Monika Piazzesi & Martin Schneider & Selale Tuzel, 2004. "Housing, Consumption and Asset Pricing," 2004 Meeting Papers, Society for Economic Dynamics 357c, Society for Economic Dynamics.
    2. Martin Lettau & Sydney C. Ludvigson, 2011. "Shocks and Crashes," NBER Working Papers 16996, National Bureau of Economic Research, Inc.
    3. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/generalized method of moments estimation and testing," Stata Journal, StataCorp LP, StataCorp LP, vol. 7(4), pages 465-506, December.
    4. Richard A. Ashley & Randall J. Verbrugge., 2006. "Mis-Specification in Phillips Curve Regressions: Quantifying Frequency Dependence in This Relationship While Allowing for Feedback," Working Papers, Virginia Polytechnic Institute and State University, Department of Economics e06-11, Virginia Polytechnic Institute and State University, Department of Economics.
    5. Richard Ashley & Kwok Ping Tsang & Randal J. Verbrugge, 2010. "Frequency Dependence in a Real-Time Monetary Policy Rule," Working Papers, Virginia Polytechnic Institute and State University, Department of Economics e07-21, Virginia Polytechnic Institute and State University, Department of Economics.
    6. Richard A. Ashley. & Randall J. Verbrugge, 2006. "Frequency Dependence in Regression Model Coefficients: An Alternative Approach for Modeling Nonlinear Dynamic Relationships in Time Series," Working Papers, Virginia Polytechnic Institute and State University, Department of Economics e06-7, Virginia Polytechnic Institute and State University, Department of Economics.
    7. Gonzalo, Jesus & Granger, Clive W J, 1995. "Estimation of Common Long-Memory Components in Cointegrated Systems," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 13(1), pages 27-35, January.
    8. Richard A. Ashley & Kwok Ping Tsang, 2013. "Credible Granger-Causality Inference with Modest Sample Lengths: A Cross-Sample Validation Approach," Working Papers, Virginia Polytechnic Institute and State University, Department of Economics e07-41, Virginia Polytechnic Institute and State University, Department of Economics.
    9. Engelhardt, Gary V., 1996. "House prices and home owner saving behavior," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 26(3-4), pages 313-336, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:vpi:wpaper:e07-42. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Djavad Salehi-Isfahani).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.