Abstract
The emerging economies that do not face fiscal, monetary and foreign debt pressures can use the savings generated by lower oil prices for investments in order to generate economic growth. Hence, there is no doubt that the oil price affects the economy’s resilience to shocks. The importance of this impact derives from the magnitude of the price change and its diffusion within the economy. Moreover, the sustainability of any company and of the economy as a whole is subject to the availability and the price of the energy resources. The cost of these resources is an important variable used in the majority of the models regarding the assessment of sustainable development. Therefore, this article examines the impact of the oil price changes on industrial production in Romania. We found that, similar to other countries, in Romania, the growth rate of industrial production responds more strongly to a rise in oil prices. Thus, the oil Brent price has an asymmetric effect on the production evolution. This finding suggests that macroeconomic stabilization is more difficult to achieve when the oil price rises.
Highlights
The impact of oil prices on the main macroeconomic variables—economic growth, inflation and unemployment—represents an important economic issue
Similar to other countries, in Romania, the growth rate of industrial production responds more strongly to a rise in oil prices
This article analyses the impact of the oil Brent price on industrial production in Romania by using monthly data for the period of January 2008–July 2016
Summary
The impact of oil prices on the main macroeconomic variables—economic growth, inflation and unemployment—represents an important economic issue. Burbidge and Harrison [5] used the auto-regression vector (VAR) methodology to analyse how industrial production was influenced by the oil price in the US, Japan, the Federal Republic of Germany, the United Kingdom (UK), and Canada for the period of 1961–1982. Hamilton [6] analysed the influence of oil prices on GDP evolution He employed a nonlinear regression model to demonstrate that there is a negative relationship between the quarterly growth rate of chain-weighted real GDP and the nominal crude oil producer price index, seasonally unadjusted. He showed that the fall of oil prices is not as important for predicting the evolution of the GDP as the price increase. He concluded that divergent changes in oil prices affected the economy of Japan in different ways
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