An asymmetric approach to the oil prices-trade balance nexus: New evidence from bilateral trade between Korea and her 14 trading partners

Abstract

Although the literature on the relationship between oil prices and the trade balance exists, relatively little attention has been given to the asymmetric effects of oil prices on the trade balance at a bilateral level. Thus, the primary thrust of this paper is to probe the asymmetric influences of oil price fluctuations on the bilateral trade balance between Korea and each of her 14 largest trading partners. To this end, we use the method of the nonlinear autoregressive distributed lag (NARDL). We discover that there is evidence that ups and downs of oil prices appear to asymmetrically impacts Korea’s trade with some trading partners, though not all, in the long- and short-run.