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The macroeconomic effects of oil price shocks on ASEAN-5 economies

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Abstract

ASEAN-5’s continued economic growth with high oil and trade intensities means it is a fast growing region with a significant presence in the global energy market. This paper identifies three main drivers of oil price shocks - oil-supply, globalactivity and oil-specific demand shocks for the period 2000-2013. Subsequently, it assesses the effects of the identified oil shocks on the ASEAN-5’s macroeconomic variables and examines the responses of monetary policy. Since the recent shocks are largely demand driven, the impulse responses and historical decomposition for the ASEAN-5 highlight that the effects on inflation are accentuated while the effects on economic growth are less disruptive. The exchange rate responses are mostly positive while the effects on trade are positive for Malaysia, a net oil exporter and are moderately negative for the oil importers. Consequently the ASEAN-5’s central banks could tighten their monetary policy in response to higher inflation without fear of weakening their economies. The empirical results highlight that for monetary policy responses to be more supportive of growth, policy makers in these economies should examine the underlying causes of the future oil shocks.

Suggested Citation

  • Raghavan, Mala, 2015. "The macroeconomic effects of oil price shocks on ASEAN-5 economies," Working Papers 2015-10, University of Tasmania, Tasmanian School of Business and Economics.
  • Handle: RePEc:tas:wpaper:22667
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    Cited by:

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    2. Huntington, Hillard G. & Barrios, James J. & Arora, Vipin, 2019. "Review of key international demand elasticities for major industrializing economies," Energy Policy, Elsevier, vol. 133(C).
    3. Mirzosaid Sultonov, 2017. "The impacts of the oil price fall on the exchange rates of ASEAN-5: Evidence from the 2014 oil price shock," Economics Bulletin, AccessEcon, vol. 37(1), pages 468-479.
    4. Vu, Tuan Khai & Nakata, Hayato, 2018. "Oil price fluctuations and the small open economies of Southeast Asia: An analysis using vector autoregression with block exogeneity," Journal of Asian Economics, Elsevier, vol. 54(C), pages 1-21.

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    More about this item

    Keywords

    Macroeconomics; Oil prices; Emerging Asia; Monetary Policy;
    All these keywords.

    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
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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