Non-linear unit root properties of crude oil production
While there is good reason to expect crude oil production to be non-linear, previous studies that have examined the stochastic properties of crude oil production have assumed that crude oil production follows a linear process. If crude oil production is a non-linear process, conventional unit root tests, which assume linear and systematic adjustment, could interpret departure from linearity as permanent stochastic disturbances. The objective of this paper is to test for non-linearities and unit roots in crude oil production. To realize our objective, this study applies a threshold autoregressive model with an autoregressive unit root to monthly crude oil production for 17 OPEC and non-OPEC countries over the period January 1973 to December 2007. Specifically, first we test for the presence of non-linearities (threshold effects) in the production of crude oil in two regimes. Second, we test for a unit root against a non-linear stationary process in two regimes and a partial unit root process when the unit root is present in one regime only. We find that crude oil production is characterized by threshold effects. We find that for eleven of the countries a unit root was present in both regimes, while for the others a partial unit root was found to be present in either the first regime or second regime.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Bruce E. Hansen & Mehmet Caner, 1997.
"Threshold Autoregressions with a Unit Root,"
Boston College Working Papers in Economics
381, Boston College Department of Economics.
- Sadorsky, Perry, 1999. "Oil price shocks and stock market activity," Energy Economics, Elsevier, vol. 21(5), pages 449-469, October.
- Kumar Narayan, Paresh & Smyth, Russell, 2007.
"Are shocks to energy consumption permanent or temporary? Evidence from 182 countries,"
Elsevier, vol. 35(1), pages 333-341, January.
- Paresh Kumar Narayan & Russell Smyth, 2005. "Are Shocks To Energy Consumption Permanent Or Temporary? Evidence From 182 Countries," Monash Economics Working Papers 06/05, Monash University, Department of Economics.
- James D. Hamilton, 2000.
"What is an Oil Shock?,"
NBER Working Papers
7755, National Bureau of Economic Research, Inc.
- Gilberto Libanio, 2005.
"Unit roots in macroeconomic time series: theory, implications, and evidence,"
Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 15(3), pages 145-176, September.
- Gilberto A. Libanio, 2004. "Unit roots in macroeconomic time series: theory, implications, and evidence," Textos para Discussão Cedeplar-UFMG td228, Cedeplar, Universidade Federal de Minas Gerais.
- Chen, Pei-Fen & Lee, Chien-Chiang, 2007. "Is energy consumption per capita broken stationary? New evidence from regional-based panels," Energy Policy, Elsevier, vol. 35(6), pages 3526-3540, June.
- Lee, Chien-Chiang & Chang, Chun-Ping, 2007. "Energy consumption and GDP revisited: A panel analysis of developed and developing countries," Energy Economics, Elsevier, vol. 29(6), pages 1206-1223, November.
- Katarina Juselius & David F. Hendry, 2000.
"Explaining Cointegration Analysis: Part II,"
00-20, University of Copenhagen. Department of Economics.
- David F. Hendry & Katarina Juselius, 2000. "Explaining Cointegration Analysis: Part 1," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-42.
- David F. Hendry & Katarina Juselius, 2001. "Explaining Cointegration Analysis: Part II," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-120.
- Chi-Young Choi & Young-Kyu Moh, 2007. "How useful are tests for unit-root in distinguishing unit-root processes from stationary but non-linear processes?," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 82-112, 03.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
- Erdem Basci & Mehmet Caner, 2005.
"Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a new Threshold Unit Root Test,"
- Basci Erdem & Caner Mehmet, 2005. "Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a New Threshold Unit Root Test," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(4), pages 1-21, December.
- Alan A. Carruth & Mark A. Hooker & Andrew J. Oswald, 1998.
"Unemployment Equilibria And Input Prices: Theory And Evidence From The United States,"
The Review of Economics and Statistics,
MIT Press, vol. 80(4), pages 621-628, November.
- Carruth, A.A. & Hooker, M.A. & Oswald, A.J., 1998. "Unemployment Equilibria and Input Prices: Theory and Evidence from the United States," The Warwick Economics Research Paper Series (TWERPS) 496, University of Warwick, Department of Economics.
- Carruth,a. & Hooker, N. & Oswald,A., 1997. "Unemployment Equilibria and Input Prices: Theory and Evidence from the United States," Papers 22, Centre for Economic Performance & Institute of Economics.
- Lutz Kilian, 2008.
"Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?,"
The Review of Economics and Statistics,
MIT Press, vol. 90(2), pages 216-240, May.
- Kilian, Lutz, 2005. "Exogenous Oil Supply Shocks: How Big Are They and How Much do they Matter for the US Economy?," CEPR Discussion Papers 5131, C.E.P.R. Discussion Papers.
- Narayan, Paresh Kumar, 2006. "The behaviour of US stock prices: Evidence from a threshold autoregressive model," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 71(2), pages 103-108.
- Brandt, Adam R., 2007. "Testing Hubbert," Energy Policy, Elsevier, vol. 35(5), pages 3074-3088, May.
- Lee, Chien-Chiang & Chang, Chun-Ping, 2008. "Energy consumption and economic growth in Asian economies: A more comprehensive analysis using panel data," Resource and Energy Economics, Elsevier, vol. 30(1), pages 50-65, January.
- Kim, In-Moo & Loungani, Prakash, 1992.
"The role of energy in real business cycle models,"
Journal of Monetary Economics,
Elsevier, vol. 29(2), pages 173-189, April.
- Michael M Hutchison, 1990.
"Manufacturing sector resiliency to energy booms: Empirical evidence from Norway, the Netherlands and the United Kingdom,"
BIS Working Papers
13, Bank for International Settlements.
- Hutchison, Michael M, 1994. "Manufacturing Sector Resiliency to Energy Booms: Empirical Evidence from Norway, the Netherlands, and the United Kingdom," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 311-29, April.
- Al-Iriani, Mahmoud A., 2006. "Energy-GDP relationship revisited: An example from GCC countries using panel causality," Energy Policy, Elsevier, vol. 34(17), pages 3342-3350, November.
- Joyeux, Roselyne & Ripple, Ronald D., 2007. "Household energy consumption versus income and relative standard of living: A panel approach," Energy Policy, Elsevier, vol. 35(1), pages 50-60, January.
- John H. Cochrane, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 241-265.
- Robert K. Kaufmann & Cutler J. Cleveland, 2001. "Oil Production in the Lower 48 States: Economic, Geological, and Institutional Determinants," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 27-49.
- Ho, Tsung-wu, 2005. "Investigating the threshold effects of inflation on PPP," Economic Modelling, Elsevier, vol. 22(5), pages 926-948, September.
- Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2008. "Are oil shocks permanent or temporary? Panel data evidence from crude oil and NGL production in 60 countries," Energy Economics, Elsevier, vol. 30(3), pages 919-936, May.
- Muellbauer, John & Nunziata, Luca, 2001. "Credit, the Stock Market and Oil: Forecasting US GDP," CEPR Discussion Papers 2906, C.E.P.R. Discussion Papers.
- Chaudhuri, Kausik & Wu, Yangru, 2003. "Random walk versus breaking trend in stock prices: Evidence from emerging markets," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 575-592, April.
- Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
- Paresh Kumar Narayan, 2005. "Are the Australian and New Zealand stock prices nonlinear with a unit root?," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2161-2166.
- Kilian, Lutz, 2005. "The Effects of Exogenous Oil Supply Shocks on Output and Inflation: Evidence from the G7 Countries," CEPR Discussion Papers 5404, C.E.P.R. Discussion Papers.
- Lee, Chien-Chiang, 2005. "Energy consumption and GDP in developing countries: A cointegrated panel analysis," Energy Economics, Elsevier, vol. 27(3), pages 415-427, May.
- Bardi, Ugo, 2005. "The mineral economy: a model for the shape of oil production curves," Energy Policy, Elsevier, vol. 33(1), pages 53-61, January.
- Laurence Ball, 1993. "The Dynamics of High Inflation," NBER Working Papers 4578, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:31:y:2009:i:1:p:109-118. 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: (Zhang, Lei)
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.