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Does oil price volatility matter for Asian emerging economies?

journal contribution
posted on 2014-10-01, 00:00 authored by Shuddha RafiqShuddha Rafiq, R Salim
This article investigates the impact of oil price volatility on six major emerging economies in Asia using time-series cross-section and time-series econometric techniques. To assess the robustness of the findings, we further implement such heterogeneous panel data estimation methods as Mean Group (MG), Common Correlated Effects Mean Group (CCEMG) and Augmented Mean Group (AMG) estimators to allow for cross-sectional dependence. The empirical results reveal that oil price volatility has a detrimental effect on these emerging economies. In the short run, oil price volatility influenced output growth in China and affected both GDP growth and inflation in India. In the Philippines, oil price volatility impacted on inflation, but in Indonesia, it impacted on both GDP growth and inflation before and after the Asian financial crisis. In Malaysia, oil price volatility impacted on GDP growth, although there is notably little feedback from the opposite side. For Thailand, oil price volatility influenced output growth prior to the Asian financial crisis, but the impact disappeared after the crisis. It appears that oil subsidization by the Thai Government via introduction of the oil fund played a significant role in improving the economic performance by lessening the adverse effects of oil price volatility on macroeconomic indicators.

History

Journal

Economic analysis and policy

Volume

44

Issue

4

Pagination

417 - 441

Publisher

Elsevier

Location

Chatswood, NSW

ISSN

0313-5926

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article

Copyright notice

Chatswood, NSW