How do Oil Price Shocks Affect a Small Non-Oil Producing Economy? Evidence from Hong Kong

18 Pages Posted: 21 Apr 2010

See all articles by Jimmy Ran

Jimmy Ran

Sun Yat-Sen University (SYSU) - Department of Economics

Jan P. Voon

Lingnan University

Guangzhong Li

Sun Yat-Sen Business School, Sun Yat-Sen University

Abstract

We find no evidence from either in-sample or out-of-sample analyses that an oil price shock would necessarily affect a small non-oil producing economy such as Hong Kong. In our in-sample recursive vector autoregressive investigations, oil price does not Granger cause the key macroeconomic indicators. The forecast errors from our out-of-sample examination using a vector error correction model with oil shocks, which represents an extension to previous studies, were found to be statistically the same as those from the vector error correction model without these shocks. The analysis leads us to dispel the conventional wisdom that a small non-oil producing economy is more vulnerable to oil shocks than a larger oil-producing economy such as the USA.

Suggested Citation

Ran, Jimmy and Voon, Jan P. and Li, Guangzhong, How do Oil Price Shocks Affect a Small Non-Oil Producing Economy? Evidence from Hong Kong. Pacific Economic Review, Vol. 15, No. 2, pp. 263-280, May 2010. Available at SSRN: https://ssrn.com/abstract=1593302 or http://dx.doi.org/10.1111/j.1468-0106.2010.00501.x

Jimmy Ran (Contact Author)

Sun Yat-Sen University (SYSU) - Department of Economics ( email )

Tuen Mun, NT
Hong Kong

Jan P. Voon

Lingnan University ( email )

Department of Economics
Tuen Mun, NT
Hong Kong

Guangzhong Li

Sun Yat-Sen Business School, Sun Yat-Sen University ( email )

135 Xingang Xi Road
Guangzhou, Guangdong 510275
China

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