The Response of Industrial Production to the Price of Oil: New Evidence for Thailand

Turkish Economic Review, Vol. 4, No. 2, pp. 193-204, 2017

12 Pages Posted: 11 Jun 2016 Last revised: 25 Jul 2017

See all articles by Komain Jiranyakul

Komain Jiranyakul

National Institute of Development Administration

Date Written: July 8, 2017

Abstract

This paper examines the oil price-industrial production nexus in Thailand by using multivariate cointegration test. In addition, Granger causality is also used to examine the impact of oil price uncertainty on industrial production growth. The main focus of this paper is on one sector of the economy, i.e., manufacturing sector. Monthly data from 1993 to 2015 are utilized. Empirical results reveal that there is a stable long-run relationship between industrial production and real oil price along with other variables. Industrial production adjusts rapidly to shocks to lending rate, price level and oil price. Furthermore, there exists long-run causality running from lend rate, price level and oil price to industrial production. However, industrial production growth does not respond to oil price shock and oil price uncertainty. Asymmetric and nonlinear relationship between oil price shock and industrial output growth is not found. These findings give policy implications.

Keywords: Industrial production, oil price shock, oil price volatility, cointegration, causality

JEL Classification: C22, Q43

Suggested Citation

Jiranyakul, Komain, The Response of Industrial Production to the Price of Oil: New Evidence for Thailand (July 8, 2017). Turkish Economic Review, Vol. 4, No. 2, pp. 193-204, 2017, Available at SSRN: https://ssrn.com/abstract=2792484 or http://dx.doi.org/10.2139/ssrn.2792484

Komain Jiranyakul (Contact Author)

National Institute of Development Administration ( email )

118 Seri Thai Road
Bangkok, 10240
Thailand

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