Abstract
Abstract In this paper, we apply the structural vector autoregression (SVAR) model to decompose the international oil price shock into oil supply shocks, aggregate demand shocks and oil-specific demand shocks, and then use the DCC-GARCH model to analyse the dynamic correlations between these three kinds of oil price shocks and the macroeconomic variables of several oil importing and exporting countries. To quantify the intensity of the effect of oil shocks on these variables, we propose a measure, conditional expectation (CoE), to capture the percent change of the economic variable under oil price shocks relative to the median state. The time-varying copula model is employed to estimate the proposed measure through time. The empirical results show that, for instance, the impacts of oil price shocks on macroeconomic variables are different in different periods, showing the time-varying characteristics. Additionally, the impacts of oil price shocks on macroeconomic variables show great differences and some similarities among different countries. Finally, we give some policy suggestions for these countries, in particular for China’s special results.
Highlights
Since oil has been dominating the sources of the world energy and playing an critical role in economic activities and industrial production for several centuries, all countries in the world concentrate on oil reserve and pricing while market participants are active in investment and speculation in the oil market
The main contributions of this paper are as follows: 1) Combining structural vector autoregression (SVAR) model with DCC-GARCH model, we temporally study the dynamic correlation between oil price shocks and a country’s macro-economy in different time periods from the perspective of structural impact of oil price, rather than just regarding the oil price as a variable born out of the global economy; 2) We propose a new measure, to quantify the intensity of effects of oil shocks on macroeconomic variables, estimated by the time-varying copula model; 3) From the perspective of oil importing and exporting countries, the spatially comparative analysis is carried out among the major economies in the world, and the commonness and differences between these countries are discussed
We empirically investigate dynamic dependence between structural oil price shocks and macroeconomic variables using the monthly observations of the international crude oil market and the macroeconomic variables in different countries
Summary
Since oil has been dominating the sources of the world energy and playing an critical role in economic activities and industrial production for several centuries, all countries in the world concentrate on oil reserve and pricing while market participants are active in investment and speculation in the oil market. The main contributions of this paper are as follows: 1) Combining SVAR model with DCC-GARCH model, we temporally study the dynamic correlation between oil price shocks and a country’s macro-economy in different time periods from the perspective of structural impact of oil price, rather than just regarding the oil price as a variable born out of the global economy; 2) We propose a new measure, to quantify the intensity of effects of oil shocks on macroeconomic variables, estimated by the time-varying copula model; 3) From the perspective of oil importing and exporting countries, the spatially comparative analysis is carried out among the major economies in the world, and the commonness and differences between these countries are discussed.
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