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Reverse Globalization: Does High Oil Price Volatility Discourage International Trade?

  • Chen, Shiu-Sheng
  • Hsu, Kai-Wei

This paper examines whether higher oil price volatility causes a reversal in globalization. Using a large annual panel data set covering 84 countries all over the world from 1984 to 2008, we investigate the impacts of oil price fluctuations on international trade, namely exports and imports. We present strong and robust evidence that international trade flows will be lower when oil prices fluctuate significantly. We therefore conclude that oil price volatility hurts globalization.

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File URL: http://mpra.ub.uni-muenchen.de/36182/1/MPRA_paper_36182.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36182.

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Date of creation: 25 Jan 2012
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Handle: RePEc:pra:mprapa:36182
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  2. Hui Guo & Kevin L. Kliesen, 2005. "Oil price volatility and U.S. macroeconomic activity," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 669-84.
  3. Olivier J. Blanchard & Jordi Galí, 2007. "The Macroeconomic Effects of Oil Price Shocks: Why are the 2000s so different from the 1970s?," NBER Chapters, in: International Dimensions of Monetary Policy, pages 373-421 National Bureau of Economic Research, Inc.
  4. Bernanke, Ben S, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, MIT Press, vol. 98(1), pages 85-106, February.
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  6. Hamilton, James D & Herrera, Ana Maria, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 265-86, April.
  7. Benjamin Bridgman, 2008. "Data files for "Energy Prices and the Expansion of World Trade"," Technical Appendices 06-199, Review of Economic Dynamics.
  8. Suleiman Abu-Bader & Aamer S. Abu-Qarn, 2010. "Trade Liberalization or Oil Shocks: Which Better Explains Structural Breaks in International Trade Ratios?," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 250-264, 05.
  9. Sadorsky, Perry, 2011. "Trade and energy consumption in the Middle East," Energy Economics, Elsevier, vol. 33(5), pages 739-749, September.
  10. Henriques, Irene & Sadorsky, Perry, 2011. "The effect of oil price volatility on strategic investment," Energy Economics, Elsevier, vol. 33(1), pages 79-87, January.
  11. Korhonen, Iikka & Ledyaeva, Svetlana, 2008. "Trade linkages and macroeconomic effects of the price of oil," BOFIT Discussion Papers 16/2008, Bank of Finland, Institute for Economies in Transition.
  12. Cologni, Alessandro & Manera, Matteo, 2008. "Oil prices, inflation and interest rates in a structural cointegrated VAR model for the G-7 countries," Energy Economics, Elsevier, vol. 30(3), pages 856-888, May.
  13. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  14. Lardic, Sandrine & Mignon, Valérie, 2008. "Oil prices and economic activity: An asymmetric cointegration approach," Energy Economics, Elsevier, vol. 30(3), pages 847-855, May.
  15. Backus, David K. & Crucini, Mario J., 2000. "Oil prices and the terms of trade," Journal of International Economics, Elsevier, vol. 50(1), pages 185-213, February.
  16. Olivier J. Blanchard & Jordi Gali, 2007. "The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?," NBER Working Papers 13368, National Bureau of Economic Research, Inc.
  17. Kilian, Lutz, 2006. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," CEPR Discussion Papers 5994, C.E.P.R. Discussion Papers.
  18. Javier Ordóñez & Hector Sala & José I. Silva, 2010. "Oil price shocks and labor market fluctuations," Working Papers wpdea1005, Department of Applied Economics at Universitat Autonoma of Barcelona.
  19. Lutz, Christian & Meyer, Bernd, 2009. "Economic impacts of higher oil and gas prices: The role of international trade for Germany," Energy Economics, Elsevier, vol. 31(6), pages 882-887, November.
  20. Sadorsky, Perry, 1999. "Oil price shocks and stock market activity," Energy Economics, Elsevier, vol. 21(5), pages 449-469, October.
  21. John Elder & Apostolos Serletis, 2010. "Oil Price Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(6), pages 1137-1159, 09.
  22. Bernanke, Ben S & Gertler, Mark & Watson, Mark W, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Reply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 287-91, April.
  23. Kilian, Lutz & Rebucci, Alessandro & Spatafora, Nikola, 2009. "Oil shocks and external balances," Journal of International Economics, Elsevier, vol. 77(2), pages 181-194, April.
  24. Benjamin Bridgman, . "Energy Prices and the Expansion of World Trade," Departmental Working Papers 2003-14, Department of Economics, Louisiana State University.
  25. Peter Ferderer, J., 1996. "Oil price volatility and the macroeconomy," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 1-26.
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