Oil Prices, Production and Inflation in the Selected EU Countries: Threshold Cointegration Approach
DOI:
https://doi.org/10.12775/DEM.2014.004Keywords
asymmetric adjustment, oil price shocks, threshold cointegration, non-linearity, threshold error correction modelAbstract
This paper applies the threshold cointegration technique developed by Enders and Siklos (2001) to investigate the impact of an oil price changes on changes in production and inflation in the presence of structural break in seven European Union countries. This technique will allow for a different speed of adjustment to the long-run equilibrium depending on whether production in selected economies is above or below the long-run relationship. Given the presence of asymmetric cointegration between oil prices, production and inflation, we estimate threshold error correction models to examine long- and short-run Granger causality. We found evidence for cointegration with asymmetric adjustment in the case of France, Denmark and the total EU.References
Albiński, P. (2014), Kryzys a polityka stabilizacyjna w Unii Europejskiej (Crisis and Stabili-zation Policy in European Union), Oficyna Wydawnicza SGH, Warszawa.
Arouri, M. (2011), Does Crude Oil Move Stock Markets in Europe? A Sector Investigation, Economic Modelling, 28, 1716–1725, DOI: http://dx.doi.org/10.1016/j.econmod.2011.02.039.
Barro, R. (1995), Inflation and Economic Growth, NBER Working Paper, No. 5326, www.nber.org (15.01.2015).
Barsky, R. B., Kilian, L. (2004), Oil and Macroeconomy Since the 1970s., Journal of Eco-nomic Perspectives, 18(4), 115–134, DOI: http://dx.doi.org/10.1257/0895330042632708.
Belka, M. (1986), Doktryna społeczno-ekonomiczna Miltona Freadmana (Milton’s Friedman Socio-economic Doctrine), PWN, Warszawa.
Bernanke, B. S., Gertler, M., Watson, M. (1997), Systematic Monetary Policy and the Effects of Oil Price Shocks, Brooking Papers on Economic Activity, 1997(1), 91–157, DOI: http://dx.doi.org/10.2307/2534702.
Brown, S. P. A., Yucel, M. K. (2002) Energy Prices and Aggregate Economic Activity and Interpretative Survey, The Quarterly Review of Economic and Finance, 42, 193–208, DOI: http://dx.doi.org/10.1016/S1062-9769(02)00138-2.
Chan, K. S. (1993), Consistency and Limiting Distribution of the Least Squares Estimator of a Threshold Autoregressive Model, The Annals of Statistics, 21, 520–533, DOI: http://dx.doi.org/10.1214/aos/1176349040.
Davis, S. J., Halitwanger, J. (2001), Sectoral Job Creation and Destruction Responses to Oil Price Changes, Journal of Monetary Economics, 48, 465–512, DOI: http://dx.doi.org/10.1016/S0304-3932(01)00086-1.
EBC (2008), 10 rocznica EBC, Biuletyn miesięczny, Europejski Bank Centralny, Frankfurt am Main, http://www.ecb.int/pub/pdf/other/10thanniversaryoftheecbmb200806pl.pdf (15.01.2015).
Enders, W., Granger, C. W. J. (1998), Unit-Root Tests and Asymmetric Adjustment With an Example Using the Term Structure of Interest Rates, Journal of Business and Economic Statistics, 16, 304–311, DOI: http://dx.doi.org/10.2307/1392506.
Enders, W., Siklos, P. (2001), Cointegration and Threshold Adjustment, Journal of Business and Economic Statistics, 19(2), 166–176, DOI: http://dx.doi.org/10.1198/073500101316970395.
Engle, R. F., Granger, C. W. J. (1987) Cointegration and Error Correction Representation. Estimation and Testing, Econometrica, 55, 251–276, DOI: 10.1111/j.1368-423X.2005.00149.x.
Fosten, J., Morley, B., Taylor, T. (2012), Dynamic Misspecification in the Environmental Kuznets Curve: Evidence From CO2 and SO2 Emissions in the United Kingdom, Eco-logical Economics, 76, 25–33, DOI: http://dx.doi.org/10.1016/j.ecolecon.2012.01.023.
Friedman, M. (1976), Inflation and Unemployment, Nobel Memorial Lecture, http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1976/friedman-lecture.pdf (15.01.2015).
Hamilton, J. D. (1983), Oil and the Macroeconomy Since World War II, Journal of Political Economy, 91, 228–248, DOI: http://dx.doi.org/10.1086/261140.
Hamilton, J. D. (1996), This Is What Happened to Oil Price-Macroeconomy Relationship, Journal of Monetary Economics, 38, 215–220, DOI: http://dx.doi.org/10.1016/S0304-3932(96)01282-2.
Hooker, M. (1996), What happened to the oil price-macroeconomy relationship?, Journal of Monetary Economics, 38, 195–213, DOI: http://dx.doi.org/10.1016/S0304-3932(96)01281-0.
Jimenez-Rodriguez, R., Sanchez, M. (2005), Oil Price Shocks and Real GDP Growth: Empir-ical Evidance For Some OECD Countries, Applied Economics, 37, 201–228, DOI: http://dx.doi.org/10.1080/0003684042000281561.
Lardic, S., Mignon, V. (2006), The Impact of Oil Prices on GDP in European Countries: An Empirical Invetigation Based on Asymmetric Cointegration, Energy Policy, 34, 3910–3915, DOI: http://dx.doi.org/10.1016/j.enpol.2005.09.019.
Lutz, C., Mayer, B. (2009), Economic Impacts of Higher Oil and Gas Prices. The Role of International Trade for Germany, Energy Economics, 31, 882–887, DOI: http://dx.doi.org/10.1016/j.eneco.2009.05.009.
Mork, K. A. (1989) Oil and the Macroeconomy When Prices Go Up and Down: an Extention of Hamilton’s Results, Journal of Political Economy, 91, 740–744, DOI: http://dx.doi.org/10.1086/261625.
Mork, K.A., Olsen, O., Mysen, H.T. (1994), Macroeconomic Responses to Oil Price Increases and Decreases in Seven OECD Countries, Energy Journal, 15, 19–35, DOI: http://dx.doi.org/10.5547/ISSN0195-6574-EJ-Vol15-No4-2.
Papapetrou, E. (2001), Oil Price Shocks a, Stock Market, Economic Activity and Employment in Greece, Energy Economics, 23(5), 511–532, DOI: http://dx.doi.org/10.1016/S0140-9883(01)00078-0.
Petruccelli, J., Woolford, S. W. (1984), A Threshold AR(1) Model, Journal of Applied Prob-ability, 21(2), 270–286, DOI: http://dx.doi.org/10.2307/3213639.
Scholtens, B., Yurtsever, C. (2012), Oil Price Shocks and European Industries, Energy Eco-nomics, 34(4), 1187–1195, DOI: http://dx.doi.org/10.1016/j.eneco.2011.10.012.
Yau, H-Y., Nieh, C. (2009), Testing for Cointegration With Threshold Effect Between Stock Prices and Exchange Rates in Japan and Taiwan, Japan and the World Economy, 21(3), 292–300, DOI: http://dx.doi.org/10.1016/j.japwor.2008.09.001.
Downloads
Published
How to Cite
Issue
Section
License
The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).
To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.
Stats
Number of views and downloads: 386
Number of citations: 0
