Asymmetric Effects Of Oil Prices Research Articles

Oil price, energy consumption and CO2 emissions as growth determinants: a PVAR system GMM approach

Purpose This study aims to revisit the empirical debate about the asymmetric relationship between oil prices, energy consumption, CO2 emissions and economic growth in a panel of 184 countries from 1981 to 2020. Design/methodology/approach A relatively new research method, the PVAR system GMM, is applied. Findings The outcome of the PVAR system GMM model at the group level in the study suggests that oil prices exert a positive but statistically insignificant effect on economic growth. Energy consumption is inversely related to economic growth but statistically significant, and the correlation between CO2 emissions and economic growth is negative but statistically insignificant. The Granger causality test indicates that oil prices, CO2 emissions, oil rents, energy consumption and savings jointly Granger-cause economic growth. A unidirectional causality runs from energy consumption, savings and economic growth to oil prices. At countries’ income grouping levels, oil prices, oil rent, CO2 emissions, energy consumption and savings jointly Granger-cause economic growth for the high-income and upper-middle-income countries groups only, while those variables did not jointly Granger-cause economic growth for the low-income and lower-middle-income countries groups. The modulus emanating from the eigenvalue stability condition with the roots of the companion matrix indicates that the model is stable. The results support the asymmetric impacts of oil prices on economic growth and aid policy formulation, particularly the cross-country disparities regarding the nexus between oil prices and growth. Originality/value From a methodological perspective, to the best of the author’s knowledge, the study is the first attempt to use the PVAR system GMM and such a large sample group of 184 economies in the post-COVID-19 era to examine the impacts of oil prices on countries’ growth while controlling for other crucial variables, which is noteworthy. Two, using the World Bank categorisation of countries according to income groups, the study adds another layer of contribution to the literature by decomposing the 184 sample economies into four income groups: high-income, low-income, upper-middle-income and lower-middle-income groups to investigate the potential for asymmetric effects of oil prices on growth, the first of its kind in the post-COVID-19 period.

Asymmetric Effect of Oil Price on Economic Activity: Evidence from Lebanon Using NARDL Model

The aim of this paper is to investigate the impact of oil prices on the real economic activity of Lebanon, represented by the Gross Domestic Product (GDP) while controlling for inflation. For this purpose, this study employs a non-linear auto-regressive distributed lag model (NARDL) that enables to take into consideration the asymmetrical nature of the relationship between these two variables. The empirical findings confirm the asymmetric impact of changes in oil prices on economic activity. Notably, reductions in oil prices positively influence GDP in the long term and exert a more pronounced fluctuating effect compared to increases in oil prices, which are statistically insignificant. In other words, the country’s GDP, serving as a measure of the total value of finished goods and services, does not respond significantly to oil price rises but is influenced by oil price reductions. This empirical analysis focuses particularly on Lebanon, and time series data spanning from 1988 to 2021 are used to explore this relationship. This study guides Lebanon's policymakers, revealing the impact of declining oil prices on economic activity. It highlights growth opportunities amidst challenges like economic crises and corruption. Advocating for prudent policies and strategies, it offers a pathway for sustainable development.

Asymmetric effects of oil prices on inflation in Côte d’Ivoire

This study examines the asymmetric effects of both international and local oil prices on the inflation rate in Côte d’Ivoire over the period 2005–2022. A nonlinear autoregressive distributed lag (NARDL) model is used to account for the asymmetric effects and analyse both long run and short run effects of oil prices on inflation. The results indicate that in the long run, an increase in international and local oil prices results in an increase in inflation rate, with higher effect for local oil prices. In addition, long run effects of a negative oil price variation on inflation have a greater magnitude than that of a positive one. The effects on inflation of Brent and diesel are statistically symmetrical. It is also found that the inflationary effects of diesel prices are greater than those of other petroleum products. Policy recommendations are provided based on the empirical results of the paper.

Oil prices and the load capacity factor in African oil-producing OPEC members: Modeling the symmetric and asymmetric effects

Most oil-producing economies are heavily dependent on oil. Although this situation allowed some of them to grow rapidly, particularly during high oil prices, it may have adverse environmental repercussions. The purpose of this research is to empirically investigate the symmetric and asymmetric effects of oil prices on the load capacity factor in seven African oil-producing OPEC countries between 1990 and 2018. The paper employs the PMG-ARDL model to estimate the symmetric effects of oil prices, while the asymmetric effects are obtained using the PMG-NARDL. The empirical findings suggest slope heterogeneity and cross-section dependence, while the Westerlund cointegration test confirms the existence of a significant long-run relationship. The PMG-ARDL test reveals no evidence of significant symmetric effects of oil prices on the load capacity factor in the short- and long-run. On the contrary, the PMG-NARDL model indicates that the load capacity factor is negatively affected by oil price increases, with short-run effects exceed long-run effects. These results still hold when employing the CS-ARDL and CS-NARDL models. Moreover, the results suggest the validity of the Load Capacity Curve hypothesis with a turning point ranging between 6674 and 7623 dollars per capita. Finally, the causality analysis confirms the previous results, as the load capacity is only caused by oil price increases.

The asymmetric effect of oil price on ecological footprint: evidence from oil-producing African countries

This study investigates the asymmetric impact of oil price (OP) on the ecological footprint (EF) in the major oil-producing African countries over the period 1988–2018. Results from the dynamic seemingly unrelated regression (DSUR) and the countrywise FMOLS regressions establish the asymmetric impact of OP on EF in the countries. Both GDP per capita and non-renewable energy (NRE) consumption are also affirmed as drivers of environmental degradation, while renewable energy consumption is found to be a promoter of environmental sustainability. Furthermore, a unidirectional causal relationship is found from OP to EF, GDP and NRE, while feedback is reported between EF and GDP. Therefore, the study proposes the need for diversification of the energy mix in these countries through the formulation of policies that would drive renewable energy usage without slowing down growth.

Inquiring asymmetric effects of oil prices, money supply, and domestic debt on consumer prices: an empirical evidence from Pakistan.

Oil prices (OP) may play a significant role in determining inflation in any oil-importing economy and could have an asymmetrical effect as well. Thus, this paper aims to explore the asymmetric influence of OP, broad money supply (BMS), and domestic debt (DD) on the Consumer Price Index (CPI) in the oil-importing economy of Pakistan using the nonlinear autoregressive distributive lag (NARDL) methodology on an annual sample from 1980 to 2021. The long-run results show that increasing OP and BMS have a positive effect on CPI. Similarly, decreasing OP and BMS have a positive effect on CPI. So, increasing OP and BMS is raising price levels, and decreasing OP and BMS is reducing price levels. OP has a positive and symmetrical effect on CPI. However, the BMS has a positive but asymmetrical effect on CPI. Furthermore, the effect of decreasing BMS is found greater than increasing BMS. Moreover, the effect of DD on CPI is also found asymmetrical. The increasing DD has a positive effect, and decreasing DD has a negative effect on CPI. The most of short-run results follow the long-run results. However, energy usage shows a negative effect on CPI in the short run, which is insignificant in the long-run results. This study recommends controlling the money supply and oil prices to reduce consumer prices.

Asymmetric Pass-through Effects of Oil Price Shocks and Exchange Rates on Inflation in Nigeria: Evidence from a Nonlinear ARDL Model

This paper employs the linear autoregressive distributed lag (ARDL) model, the asymmetric nonlinear ARDL (NARDL) model developed by Shin, et al (2014) to examine the asymmetric effect of oil price and exchange rates pass-through on inflation in Nigeria over a period of 1970 to 2020. The result of the asymmetric test revealed the existence of asymmetries among the variables of the study, suggesting that there is a nonlinear interaction among the variables used in the study. This validates the choice of a non-linear ARDL model for the study. Results of the long-run estimates show that rising (Positive) oil price shocks have a greater impact on inflation than falling (negative) oil price shocks. Furthermore, it is evident from the result that the depreciation of the exchange rate has a much and significant effect on inflation than the appreciation of the exchange rate in Nigeria. However, a rising interest rate increases inflation by 0.84 per cent while a falling interest rate increases inflation by 0.85 per cent. This implies that the effect of negative interest rate on inflation is higher than its positive effect on inflation, though, by a smaller amount of about 0.01 per cent. Again, the short-run dynamic model revealed a high speed of convergence of more than 90% from the short-run disequilibrium. During the study period, the oil price fluctuations showed a significant and incomplete pass-through to both exchange rates and inflation in Nigeria. Moreover, the results suggest that positive oil price changes have a larger impact than the negative ones, that the effect of an oil price shock on inflation and exchange rates is larger in the long-run than in the short-run, and that there is incomplete pass-through effect of oil price on domestic inflation and exchange rates. Based on the findings, the study recommends policies that set oil prices and exchange rates within reasonable limits to check inflation in Nigeria and should diversify its economy as well as withdraw the current subsidy regime completely.

Asymmetric effects of oil price shocks on the demand for money in Algeria

This paper investigates the symmetric and asymmetric effects of real oil prices on real money demand in Algeria over the period 1999:Q1–2020:Q1. Using a linear autoregressive distributed lag model (ARDL), and a nonlinear autoregressive distributed lag model (NARDL), we find no evidence of a long-term relationship among the variables. Interestingly, we reveal that the NARDL model provides strong evidence of a stable money demand. Moreover, the evidence shows that, in the short-term, only real oil price reductions will result in a decrease in real money demand. In the long-term, our findings suggest that oil price increases (decreases) will lead to higher (lower) money demand. Additionally, we find that negative oil price shocks will yield a stronger effect on money demand compared to positive shocks. These results indicate that money demand is a channel through which oil price shocks may affect the macroeconomic activity in Algeria. Therefore, Algerian policymakers should incorporate this asymmetric relationship between oil prices and money demand in designing their monetary policies.

Asymetric Pass-through Effects of Oil Price Shocks and Exchange Rates on Inflation in Nigeria: Evidence from a Nonlinear ARDL Model

By utilizing the non-linear ARDL (NARDL) model developed by Shin, et al (2014), we examined the asymmetric effect of oil price and exchange rates pass-through on inflation in Nigeria over a period of 1970 to 2020. Result of asymmetric test revealed the existence of asymmetries among the variables of the study, suggesting that there is a nonlinear interaction among the variables used in the study. This validates the choice of non-linear ARDL model for the study. Result of the long-run estimates show that rising (Positive) oil price shocks have a greater impact on inflation than falling (negative) oil price shock. Furthermore, ot is evident form the result that depreciation of exchange rate has much and significant effect on inflation than the appreciation of exchange rate in Nigeria. However, rising interest rate increases inflation by 0.84 per cent while falling interest rate increases inflation by 0.85 per cent. This implies that the effect of negative interest rate on inflation is higher than its positive effect on inflation, though, by a smaller amount of about 0.01 per cent. Again, the short-run dynamic model revealed a high speed of convergence of more than 90% from the short run disequilibrium. During the study period, the oil price fluctuations showed a significant and incomplete pass-through to both exchange rates and inflation in Nigeria. Based on the findings, the study recommends policies that set oil prices and exchange rate within reasonable limits in order to chack inflation in Nigeria.

The asymmetric effect of oil price, news-based uncertainty, and COVID-19 pandemic on equity market

Equity markets are prone to several external factors, especially in the lethal pandemic situation when the uncertainty regarding the spread of the COVID disrupts the daily financial and economic activities along with the sharp decline in the oil price causing severe devastations to people not just in terms of life and health but also in the form of finance. Therefore, to assess the presence of empirical association of the oil price, Covid-19, and news-based uncertainty with the equity market condition, the method of QARDL was applied in the current investigation. The results revealed that the relationship of OIL was found to be positive and significant across all of the quantiles of the Stock Price Index (SPI); news-based uncertainty was found to be negative and significant across all of the quantiles of SPI, whereas COVID19 has the negative and significant impact on SPI only in the bearish and stable market conditions. Based on the findings, balance government interventions are recommended, balancing the generation of economic activities and counter COVID spread.

The asymmetric effects of international oil prices, oil price uncertainty and income on urban residents’ consumption in China

This study employs the nonlinear autoregressive distributed lag (NARDL) model to investigate the asymmetric effects of international oil prices (oil price uncertainty) and urban residents’ income on consumption in China. The empirical results show that the asymmetric effects of oil prices (oil price uncertainty) and urban residents’ income on consumption are significant in the both the short- and long-term. Specifically, increasing urban residents’ consumption significantly respond to a decline in oil prices while there is no obvious decreased consumption response to a rise in oil prices due to the wealth transfer effect. We also observe that the stimulating effect of falling oil price uncertainty on urban residents’ consumption is noticeably stronger than the adverse effect of increasing oil price uncertainty on consumption because of the expectation effect. Finally, we find that the asymmetric effect of income changes on consumption is significant due to the ratchet effect, whereby an income increase has a stronger stimulus effect than the reducing effect of income decline on consumption.

Asymmetric Linkages of Oil Prices, Money Supply, and TASI on Sectoral Stock Prices in Saudi Arabia: A Non-Linear ARDL Approach

This study examines the asymmetric effects of oil prices, money supply, and the Tadawul All Share Index (TASI) on sectoral stock prices in Saudi Arabia. By applying a nonlinear auto-regressive distributive lag (NARDL) approach to monthly data spanning from January 2007 to December 2016, we found that the positive shocks of oil prices were more than the negative ones in the building and construction, energy and utilities, and petrochemical sectors, while higher oil prices adversely influenced the stock price of the bank and financial service sector. We identified the long-run and short-run asymmetric relationships of the Saudi stock market development on the stock prices of bank and financial services, energy and utilities, and the petrochemical sector and only a long-running asymmetric relationship with the building and construction sector. We also found the absence of long-run and short-run asymmetric impact of money supply on three sectors, namely, building and construction, energy and utilities, and the petrochemical sector except for the bank and financial service sector where only a long-running asymmetric relation was observed. These findings are appropriate for investors and portfolio managers to make judicious investment decisions. Policymakers should diversify their economic sectors apart from the oil dependencies to achieve the Vision 2030.

Investigating the Asymmetric Effect of Oil Price on the Economic Growth in Malaysia: Applying Augmented ARDL and Nonlinear ARDL Techniques

This paper attempts to investigate if the effect of oil price on growth is asymmetrical for Malaysia, a small-open-dynamic oil-exporting country, over a period from 1981 to 2017. The empirical method employed in this study is the augmented autoregressive distributed lag model (ARDL) bound test approach and the recent innovative nonlinear autoregressive distributed lag (NARDL) model. Results suggest that neglecting nonlinearities can lead to misleading results. More precisely, the result reveals that adjustments in the price of oil influence Malaysia’s economic growth asymmetrically. An increase and decrease in the price of oil strengthen the economic growth of Malaysia, demonstrating Malaysia’s ability to be both an oil-producing country and a trading nation. These results strongly imply that Malaysia is able to take advantage of changes in the oil price efficiently.

Impact of oil price fluctuations on food prices: fresh insight from asymmetric ARDL approach of co-integration

The current study analyses the asymmetric effects of oil prices on food prices in Pakistan from 1977 to 2017. ADF, PP, and KPSS root unit tests were used to substantiate data stationarity, while nonlinear autoregressive distributed lags (NARDL) were utilised for asymmetry testing. The NARDL results confirm co-integration and show a strong positive impression of oil price rise to food prices in the long-run. In the meantime, a decline in oil prices relationship with food prices is absent and inconsequential. Additionally, positive changes in oil prices have a considerable role in food prices only in the short-run. Due to the absence of the significant influence of oil prices reduction at food prices in the short-run and long-run, market strength could be essential for forming Pakistan's food value behaviour.

Exploring the asymmetric effect of oil price on exchange rate: Evidence from the top six African net oil importers

The paper investigates the oil price fluctuation on exchange rates for main African net oil importing countries, namely South Africa, Morocco, Côte d’Ivoire, Kenya, Ghana and Senegal that cover for the period from 1983Q2 to 2018Q4. In order to thoroughly examine the subject matter, this study takes a specific account of the symmetric and asymmetric effects of oil price changes in modelling process by utilizing innovative linear autoregressive distributed lag (ARDL) technique and asymmetric nonlinear autoregressive distributed lag (NARDL) technique, which accommodate the short-run and long-run asymmetries via positive (increase) and negative (decrease) partial sum decompositions of oil price shocks. The result suggests that the variables are cointegrated, signifying the evidence of long and short run relationships of each country. Evidence of long and short run asymmetries is also confirmed in Côte d’Ivoire, Ghana and Senegal, suggesting that rising and declining oil price have different effect on exchange rate, while symmetric effect is observed in South Africa and Morocco. Rising oil price has positive effect on exchange rate in South Africa and Senegal leading to depreciation of exchange rate, while falling oil price leads to exchange rate appreciation of South Africa rand, Ghanaian cedi and Senegal francs but exchange rate depreciation of Moroccan dirham and Cote d’Ivoire francs. The result further suggests that negative decrease in oil price has a larger impact on exchange rate than the positive increase that varies in sign and size across countries. This suggests that oil price changes play a significance role that influence the behaviour of exchange rate and hence leading to contribute to the development of national economic progress.

THE ASYMMETRIC EFFECT OF OIL PRICE ON THE EXCHANGE RATE AND STOCK PRICE IN NIGERIA

The study examines the asymmetric effect of oil price on the exchange rate and stock price using the Nonlinear Autoregressive Distributive Lag (NARDL) technique on the time-series data spanning from January 1996 to September 2020. The multivariate cointegration test showed evidence of a long-run relationship among the stock price, exchange rate, and oil price. The linear Granger causality test showed that stock price is granger caused by oil price and exchange rate, and oil price is granger cause by stock price and exchange rate. The nonlinear granger causality showed evidence of nonlinearity using the BDS test. The Dick-Panchenko non-parametric and nonlinear Granger causality test in a contrary to the linear Granger causality test showed a unidirectional nonlinear causality from exchange rate to stock price at 10% level, and from oil price to exchange rate at 1% and 10% levels respectively. The result from the nonlinear ARDL revealed that change in oil price impacted asymmetrically on the exchange rate and stock price both in the short-run and long-run. The study recommends that the revenue generated from increasing oil price should be used for developing and reinstalling decayed infrastructure and oil-exporting countries should develop mechanisms and strategies that will ensure fair stability in the capital markets irrespective of the shocks in oil price.

ASYMMETRIC EFFECT OF OIL PRICE CHANGE ON INFLATION: EVIDENCE FROM SUB SAHARAN AFRICA COUNTRIES

This study is aimed at investigating the asymmetric effect of oil price on inflation for Sub Saharan Africa (SSA) countries. Based on the findings from the dynamic heterogenous nonlinear panel ARDL estimation, a panel data representation of Shin et al. (2014), the long run asymmetric relationship exists between both oil price increase (op+) and decrease (op-) and inflation for these countries. Nevertheless, the oil price increase tends to exert more effect on inflation than the oil price decrease. For policy implication, the monetary authorities shall pay more attention to the increase in oil price than the oil price decrease in designing appropriate policies of price stability as the former exerts greater impact on inflation than the latter. The price stability as one of the key macroeconomic goals could be attained if these countries understand the oil price-inflation relationship and then monetary measures can be adjusted to endure the effect of oil price changes especially increase in oil price on the price level so that stability in the prices of output can be maintained.Keywords: Panel data, inflation, Asymmetry, Sub Saharan AfricaJEL Classifications: C33, E31, E3DOI: https://doi.org/10.32479/ijeep.10764

Movements of oil prices and exchange rates in China and India: New evidence from wavelet-based, non-linear, autoregressive distributed lag estimations

This paper contributes to the existing literature by investigating the impact of oil prices on real exchange rates in China and India. We employ the non-linear, autoregressive-distributed lag model advanced by Shin et al. (2014), which allows both short-run and long-run asymmetry pass-through to a variable of interest. Oil prices and exchange rates are frequently found to be noisy. In order to detect the accurate relationship between oil prices and exchange rates, the maximum overlap, discrete-wavelet transformation is used to remove noise from the original series. The dynamic relationship between the original and de-noised series is compared. Our empirical findings suggest only long-run asymmetric effects of oil prices on exchange rates for both countries; however, after time-series noise removal, the asymmetric long-run effect becomes symmetric for India. Policy implications also are included.

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

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.

A dynamic quantile regression model for the relationship between oil price and stock markets in oil-importing and oil-exporting countries

This paper investigates the relationship between oil price and stock markets in the major oil-exporting (Russia, Norway, Canada) and oil-importing (USA, China, Japan) countries. We apply a time-varying asymmetric quantile regression (TV-AQR) model that conducts to provide a more comprehensive picture of the oil-stock market nexus by accounting for the time-varying propriety and the asymmetric effect of oil price on the stock returns under different market conditions. Using weekly data from January 2000 to October 2018, our results reveal that the reaction of the stock markets to crude oil price is time-varying and highly heterogeneous across conditional stock returns’ distribution. Moreover, the relationship between oil and stock markets is asymmetrical and the stock markets respond to negative oil price changes more intensively than to positive changes. We also find that the two considered markets are highly dependent during the financial crisis. These results carry crucial implications for investors as well as for policymakers regarding investment strategies and decision making.