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Oil price fluctuations and oil consuming sectors: An empirical analysis of Japan

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  • Farhad Taghizadeh-Hesary
  • Ehsan Rasoulinezhad
  • Yoshikazu Kobayashi

Abstract

Since the oil price shocks of the 1970s, several studies have found significant impacts of oil prices on macro variables. However, it is particularly crucial to know how each micro sector in an economy, such as the residential, transport, industrial and non-energy sectors, respond to oil price impulses. In this research, we try to shed light on the impact of crude oil price volatility on each sector in Japan, the world’s third-largest crude oil consumer. In order to do so, we apply a vector auto regression model and perform impulse response analysis by using quarterly data from Q1 1990 to Q1 2014. The findings indicate that some economic sectors, such as the residential sector, did not have significant sensitivity to the sharp oil price fluctuations. In contrast, some other sectors, like the commercial, industrial, and transport sectors, were strongly sensitive to the drastic oil price fluctuations. Moreover, our findings show that after the Fukushima disaster in 2011, which led to the shutdown of nuclear power plants in Japan, because of greater reliance on oil imports, the sensitivity of most sectors to oil price volatility declined.

Suggested Citation

  • Farhad Taghizadeh-Hesary & Ehsan Rasoulinezhad & Yoshikazu Kobayashi, 2016. "Oil price fluctuations and oil consuming sectors: An empirical analysis of Japan," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2016(2), pages 33-51.
  • Handle: RePEc:fan:efeefe:v:html10.3280/efe2016-002003
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    Cited by:

    1. repec:ebl:ecbull:eb-18-00218 is not listed on IDEAS
    2. Yoshino, Naoyuki & Taghizadeh–Hesary, Farhad & Miyamoto, Hiroaki, 2017. "The Effectiveness of Japan’s Negative Interest Rate Policy," ADBI Working Papers 652, Asian Development Bank Institute.
    3. Taghizadeh-Hesary, Farhad & Rasoulinezhad, Ehsan & Yoshino, Naoyuki, 2018. "Volatility Linkages between Energy and Food Prices: Case of Selected Asian Countries," ADBI Working Papers 829, Asian Development Bank Institute.
    4. Nagmi M. Moftah Aimer, 2016. "The Effects of Oil Price Volatility on the Economic Sectors of Libya," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 6(12), pages 13-24, December.
    5. Liudmila Popova & Ehsan Rasoulinezhad, 2016. "Have Sanctions Modified Iran’s Trade Policy? An Evidence of Asianization and De-Europeanization through the Gravity Model," Economies, MDPI, Open Access Journal, vol. 4(4), pages 1-15, October.
    6. repec:eee:enepol:v:129:y:2019:i:c:p:1306-1319 is not listed on IDEAS
    7. Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2016. "Optimal Credit Guarantee Ratio for Asia," ADBI Working Papers 586, Asian Development Bank Institute.
    8. Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2016. "Decline in Oil Prices and the Negative Interest Rate Policy in Japan," ADBI Working Papers 600, Asian Development Bank Institute.
    9. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2016. "Causes and Remedies of the Japan's Long-lasting Recession: Lessons for China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(2), pages 23-47, March.
    10. repec:eee:enepol:v:128:y:2019:i:c:p:796-806 is not listed on IDEAS
    11. repec:eee:enepol:v:129:y:2019:i:c:p:967-974 is not listed on IDEAS
    12. repec:fan:efeefe:v:html10.3280/efe2017-001014 is not listed on IDEAS
    13. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Rasoulinezhad, Ehsan, 2017. "Impact of Fukushima Nuclear Disaster on Oil-Consuming Sectors of Japan," ADBI Working Papers 659, Asian Development Bank Institute.
    14. repec:spr:eurase:v:8:y:2018:i:1:d:10.1007_s40822-017-0081-1 is not listed on IDEAS
    15. repec:eee:ecanpo:v:62:y:2019:i:c:p:342-356 is not listed on IDEAS

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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