The Economic Effects of Oil Prices Shocks on the UK Manufacturing and Services Sectors
: This paper investigates the relationship between changes in oil prices and the UK s manufacturing and services sectors performances. Only a few studies have been conducted at the sector level; the goal of this paper is to contribute in that direction. In a more detailed analysis, three sets of Vector Autoregressive (VAR) models are employed using linear and nonlinear oil price specifications among several key macroeconomic variables. From the linear oil price specification VAR model, the impulse response function reveals that oil price movement causes positive effects in both the output of manufacturing and services sectors. The variance decomposition shows that oil prices are quite important as a cause of the variance of the UK services sector output, while they do not have such a large role in the variance of the UK s manufacturing output. From the asymmetric specification, it has been found that positive oil price changes determine a consistent contraction in manufacturing output, while the services sector does not seem to be affected by the increases. Alternatively, negative oil price changes show that manufacturing output does not increase much despite a decrease in oil prices. The services sector is much more affected by oil prices decreases than increases. Finally, considering the Net Oil Price Increase (NOPI) specification, it has been found that the manufacturing sector is much more affected by oil price changes than the services sector.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): IX (2010)
Issue (Month): 4 (October)
|Contact details of provider:|| |
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.:
- 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.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
- P J Forsyth & J A Kay, 1980. "The economic implications of North Sea Oil Revenues," Fiscal Studies, Institute for Fiscal Studies, vol. 1(3), pages 1-28, July.
- P. J. Forsyth & J. A. Kay, 1981. "Oil revenues and manufacturing output," Fiscal Studies, Institute for Fiscal Studies, vol. 2(2), pages 9-17, July.
- Benjamin Hunt & Peter Isard & Douglas Laxton, 2002.
"The Macroeconomic Effects of Higher Oil Prices,"
National Institute Economic Review,
National Institute of Economic and Social Research, vol. 179(1), pages 87-103, January.
- Peter Isard & Benjamin L Hunt & Douglas Laxton, 2001. "The Macroeconomic Effects of Higher Oil Prices," IMF Working Papers 01/14, International Monetary Fund.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Darby, Michael R, 1982. "The Price of Oil and World Inflation and Recession," American Economic Review, American Economic Association, vol. 72(4), pages 738-751, September.
- Michael R. Darby, 1981. "The Price of Oil and World Inflation and Recession," UCLA Economics Working Papers 228, UCLA Department of Economics.
- William H. Buiter & Marcus Miller, 1981. "The Thatcher Experiment: The First Two Years," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 315-380.
- 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 311-329, 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.
- Keane, Michael P & Prasad, Eswar S, 1996. "The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 389-400, August.
- Michael P. Keane & Eswar S Prasad, 1995. "The Employment and Wage Effects of Oil Price Changes; A Sectoral Analysis," IMF Working Papers 95/37, International Monetary Fund.
- Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
- Willem H. Buiter & Marcus Miller, 1983. "Changing the Rules: Economic Consequences of the Thatcher Regime," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 305-380.
- S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
- Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-380, November.
- Lutkepohl, Helmut, 1990. "Asymptotic Distributions of Impulse Response Functions and Forecast Error Variance Decompositions of Vector Autoregressive Models," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 116-125, February.
- 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 740-744, June.
- Hooker, Mark A., 1996. "This is what happened to the oil price-macroeconomy relationship: Reply," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 221-222, October.
- Bjornland, Hilde Christiane, 1998. "The Economic Effects of North Sea Oil on the Manufacturing Sector," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(5), pages 553-585, November.
- Bean, Charles R, 1988. "Real Wage Rigidity and the Effect of an Oil Discovery," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 451-462, September.
- Bjornland, Hilde Christiane, 2000. "The Dynamic Effects of Aggregate Demand, Supply and Oil Price Shocks--A Comparative Study," Manchester School, University of Manchester, vol. 68(5), pages 578-607, September.
- Eastwood, R K & Venables, A J, 1982. "The Macroeconomic Implications of a Resource Discovery in an Open Economy," Economic Journal, Royal Economic Society, vol. 92(366), pages 285-299, June.
- Herrera, Ana María & Pesavento, Elena, 2009. "Oil Price Shocks, Systematic Monetary Policy, And The “Great Moderation”," Macroeconomic Dynamics, Cambridge University Press, vol. 13(01), pages 107-137, February. Full references (including those not matched with items on IDEAS)