What is New? The Role of Asymmetry and Breaks in Oil Price–Output Growth Volatility Nexus

25 Pages Posted: 8 Mar 2019

See all articles by Ibrahim Raheem

Ibrahim Raheem

University of Ibadan - Department of Economics

Nafisat Olabisi

University of Ibadan

Date Written: March 2019

Abstract

This study examines the role of asymmetry and breaks in oil price–output growth volatility nexus. A representative of 10 countries was selected from net oil‐exporting and‐importing economies for the period 1986–2017. It is hypothesised that countries respond differently to changes in oil price. To prove this point, we use the recent nonlinear ARDL of Shin et al. ([Shin, Y., 2014]), based on the framework of the dynamic common correlated effect of the heterogeneous panel of Chudik and Pesaran ([Chudik, A., 2015]), to decompose oil price into positive and negative partial sums. Our results show that without accounting for breaks, asymmetry only matters for net oil exporters in both short‐ and long run. However, accounting for breaks expanded the importance of asymmetry to net oil importers (in the short run). These results are robust to changes in the measures of oil price and growth volatility.

Suggested Citation

Raheem, Ibrahim and Olabisi, Nafisat, What is New? The Role of Asymmetry and Breaks in Oil Price–Output Growth Volatility Nexus (March 2019). OPEC Energy Review, Vol. 43, Issue 1, pp. 67-91, 2019, Available at SSRN: https://ssrn.com/abstract=3348584 or http://dx.doi.org/10.1111/opec.12142

Ibrahim Raheem (Contact Author)

University of Ibadan - Department of Economics ( email )

Department of Economics
Ibadan, OK Oyo State 900001
Nigeria

Nafisat Olabisi

University of Ibadan

University of Ibadan
Ibadan, OR Oyo Stase 10001
Nigeria

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