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How Do Oil Price Shocks Affect A Small Non‐Oil Producing Economy? Evidence From Hong Kong

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  • Jimmy Ran
  • Jan P. Voon
  • Guangzhong Li

Abstract

We find no evidence from either in‐sample or out‐of‐sample analyses that an oil price shock would necessarily affect a small non‐oil producing economy such as Hong Kong. In our in‐sample recursive vector autoregressive investigations, oil price does not Granger cause the key macroeconomic indicators. The forecast errors from our out‐of‐sample examination using a vector error correction model with oil shocks, which represents an extension to previous studies, were found to be statistically the same as those from the vector error correction model without these shocks. The analysis leads us to dispel the conventional wisdom that a small non‐oil producing economy is more vulnerable to oil shocks than a larger oil‐producing economy such as the USA.

Suggested Citation

  • Jimmy Ran & Jan P. Voon & Guangzhong Li, 2010. "How Do Oil Price Shocks Affect A Small Non‐Oil Producing Economy? Evidence From Hong Kong," Pacific Economic Review, Wiley Blackwell, vol. 15(2), pages 263-280, May.
    • Handle: RePEc:bla:pacecr:v:15:y:2010:i:2:p:263-280
    DOI: 10.1111/j.1468-0106.2010.00501.x
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    References listed on IDEAS

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    Cited by:

    1. Alom, Fardous, 2011. "Economic Effects of Oil and Food Price Shocks in Asia and Pacific Countries: An Application of SVAR Model," 2011 Conference, August 25-26, 2011, Nelson, New Zealand 115346, New Zealand Agricultural and Resource Economics Society.
    2. Muhammad Arshad Khan & Muhammad Iftikhar Ul Husnain & Qaisar Abbas & Syed Zulfiqar Ali Shah, 2019. "Asymmetric effects of oil price shocks on Asian economies: a nonlinear analysis," Empirical Economics, Springer, vol. 57(4), pages 1319-1350, October.
    3. Usama Almulali & Che Normee Binti Che Sab, 2013. "Exploring the impact of oil revenues on OPEC members' macroeconomy," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 37(4), pages 416-428, December.
    4. Hasanat Shah, Syed & Li, Jun Jiang & Hasanat, Hafsa, 2013. "The impact of Oil Price and Oil Price Fluctuation on Growth Exports and Inflation in Pakistan," MPRA Paper 52560, University Library of Munich, Germany.
    5. Chen-Yin Kuo, 2017. "Is the accuracy of stock value forecasting relevant to industry factors or firm-specific factors? An empirical study of the Ohlson model," Review of Quantitative Finance and Accounting, Springer, vol. 49(1), pages 195-225, July.
    6. Roseline Nyakerario Misati & Esman Morekwa Nyamongo & Isaac Mwangi, 2013. "Commodity price shocks and inflation in a net oil-importing economy," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 37(2), pages 125-148, June.
    7. Kuo, Chen-Yin, 2016. "Does the vector error correction model perform better than others in forecasting stock price? An application of residual income valuation theory," Economic Modelling, Elsevier, vol. 52(PB), pages 772-789.
    8. Quah Chee-Heong, 2019. "China’s Dollar-linked Hong Kong during the Global Crisis," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 38(67), pages 95-121, February.

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