Asymmetries in the Relationship between Economic Activity and Oil Prices in the Selected EU Countries

Andrzej Geise, Mariola Piłatowska

DOI: http://dx.doi.org/10.12775/DEM.2016.004

Abstract


In this paper the threshold (T-ECM) and linear (ECM) error correction models are estimated to examine the short-run and long-run Granger causality in terms of asymmetric and symmetric relationship for seven European Union economies (Germany, France, Denmark, the Netherlands, Poland, Czech Republic and the whole EU). The relationship between production, inflation and oil prices are analyzed in the presence of structural break when both, the change in intercept and the change in the slope of the trend function exist. Threshold ECMs show the asymmetric response of production and inflation to the changes in oil prices in the case of Germany, France, Poland and the EU. For other economies (Netherlands, Denmark and Czech Republic) the reaction was rather symmetric.

Keywords


short-run asymmetry; threshold cointegration; threshold error correction model; Granger causality; oil price shock.

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References


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ISSN (online) 2450-7067

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