Effects of Oil Price Shocks on Industrial Production: Evidence from Some Oil-Exporting Countries

14 Pages Posted: 17 Sep 2006

See all articles by Apostolos Serletis

Apostolos Serletis

University of Calgary - Department of Economics

Asghar Shahmoradi

University of Calgary - Department of Economics; International Monetary Fund (IMF)

Abstract

This paper examines the effects of oil price shocks on industrial production in three oil-exporting countries, namely Iran, Saudi Arabia and Indonesia using annual data for the period 1970–2005. First, the Gregory and Hansen cointegration technique, allowing for the presence of potential structural breaks in data, is applied to empirically examine the long-run co-movement between oil price and output. Second, we test whether different measures of oil price shocks, including non-linear or asymmetric ones, Granger-cause output. The results indicate a strong causality from oil price shocks to output growth for Iran and Saudi Arabia. Moreover, the oil prices–output relationship in these two countries appears more significant when asymmetric specifications are used to model the relationship between variables. In the case of Indonesia, however, none of the oil proxies have any significant effect on output both in the short and long run. The results confirm the relatively successful experience of countries such as Indonesia in the diversification of the real sector to minimise the harmful effects of oil booms and busts.

Suggested Citation

Serletis, Apostolos and Shahmoradi, Asghar, Effects of Oil Price Shocks on Industrial Production: Evidence from Some Oil-Exporting Countries. OPEC Energy Review, Vol. 33, Issue 3-4, pp. 170-183, September/December 2009. Available at SSRN: https://ssrn.com/abstract=930811 or http://dx.doi.org/10.1111/j.1753-0237.2009.00167.x

Apostolos Serletis (Contact Author)

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 220-4091 (Phone)
403 282-5262 (Fax)

Asghar Shahmoradi

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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