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Oil shock and economic growth in Japan: A nonlinear approach

  • Zhang, Dayong

This paper investigates the relationship between oil price shock and economic growth on the basis of the nonlinear approach developed by Hamilton [Hamilton, J., 2001. A parametric approach to flexible nonlinear inference. Econometrica 537-573.]. We use the approach, also in Hamilton [Hamilton, J., 2003. What is an oil shock? Journal of Econometrics 363-398.], of capturing this relationship in Japan in a nonlinear model. The idea is that negative oil price shocks (price increase) tend to have larger impact on growth than positive shocks do. Our empirical evidence confirmed the existence of nonlinearity between these two variables and a flexible nonlinear model is estimated. Additionally, several other form of nonlinearity are estimated and tested.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 5 (September)
Pages: 2374-2390

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Handle: RePEc:eee:eneeco:v:30:y:2008:i:5:p:2374-2390
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Juncal Cuñado & Fernando Pérez de Gracia, 2001. "Do oil price shocks matter? Evidence for some European countries," Working Papers 01-02, Asociación Española de Economía y Finanzas Internacionales.
  2. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  3. 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.
  4. Cunado, J. & Perez de Gracia, F., 2005. "Oil prices, economic activity and inflation: evidence for some Asian countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(1), pages 65-83, February.
  5. Andrew B. Abel, . "Asset Prices Under Habit Formation and Catching Up With the Jones," Rodney L. White Center for Financial Research Working Papers 1-90, Wharton School Rodney L. White Center for Financial Research.
  6. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
  7. Bruce E. Hansen, 1998. "Testing for Structural Change in Conditional Models," Boston College Working Papers in Economics 310., Boston College Department of Economics.
  8. Stephen P. A. Brown & Mine K. Yücel, 2001. "Energy prices and aggregate economic activity: an interpretive survey," Working Papers 0102, Federal Reserve Bank of Dallas.
  9. Gisser, Micha & Goodwin, Thomas H, 1986. "Crude Oil and the Macroeconomy: Tests of Some Popular Notions: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 95-103, February.
  10. Nathan S. Balke & Stephen P. A. Brown & Mine Yücel, 1999. "Oil price shocks and the U.S. economy: where does the asymmetry originate?," Working Papers 9911, Federal Reserve Bank of Dallas.
  11. Rotemberg, Julio J & Woodford, Michael, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 550-77, November.
  12. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
  13. Lardic, Sandrine & Mignon, Valerie, 2006. "The impact of oil prices on GDP in European countries: An empirical investigation based on asymmetric cointegration," Energy Policy, Elsevier, vol. 34(18), pages 3910-3915, December.
  14. Hamilton, James D., 1999. "A Parametric Approach to Flexible Nonlinear Inference," University of California at San Diego, Economics Working Paper Series qt68s8157x, Department of Economics, UC San Diego.
  15. 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.
  16. 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.
  17. 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.
  18. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
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