Abstract
In this paper, we investigate the effects of oil price shocks on the production and price level in five emerging countries through comparison with the United States, using a two-block structural VAR model of the global crude oil market proposed by Kilian and Park (see International Economic, vol. 50, 2009, pp. 1267–1287). Our main finding is that the effect of oil price shocks on the index of the industrial production (IIP) and consumer price index (CPI) in emerging countries also depends on where the changes fundamentally come from (this is also the case for the United States). We also found that some emerging countries showed unique impulse response patterns, the shapes of which are different from those of the United States and there are differences in impulse response patterns among emerging countries.
Highlights
There is a large body of literature that reports on the effects of oil price shocks on a developed economy like the United States
The main findings in this paper are as follows: First, as well as the United States, we showed that the effect of oil price shocks on industrial production (IIP) and consumer price index (CPI) in emerging countries depends on where the changes fundamentally come from
Based on a two‐block structural vector autoregressive (VAR) model established by Killian and Park (2009) [1], we
Summary
Park (2009) [1], we investigate the dynamic effects of oil price shocks on the index of the industrial production (IIP) and consumer price index (CPI) for the United States and five developing countries. Economies 2016, 4, 20 demand shocks; shocks to the current demand for all industrial commodities which are determined by global macroeconomic conditions and (3) oil-specific demand shocks; shocks which cannot be explained based on oil supply shocks or aggregate demand shocks He reached a conclusion that each oil price shock affects GDP growth and CPI in the United States differently. Following this contribution, the structural VAR model has been widely applied to the later studies investigating oil-related economic issues.
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