Impact of crude oil price volatility on economic activities: an empirical investigation in the Thai economy

Rafiq, Shuddhasattwa and Salim, Ruhul A. and Bloch, Harry (2009) Impact of crude oil price volatility on economic activities: an empirical investigation in the Thai economy. Resources Policy, 34 (3). pp. 121-132. ISSN 0301-4207

Abstract

This paper empirically examines the impact of oil price volatility on key macroeconomic indicators of Thailand. Following Andersen etal.[2004. Analytical evaluation of volatility forecasts. International Economic Review 45(4), 1079–1110], quarterly oil price volatility is measured by using the realized volatility (RV). The impact of the oil price volatility is investigated using the vector auto-regression (VAR) system. The Granger causality test, impulse response functions, and variance decomposition show that oil price volatility has significant impact on macroeconomic indicators, such as unemployment and investment, over the period from 1993 Q1 to 2006 Q4. Perron’s [1997. Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics 80(2), 355–385] test identifies structural breaks in all the concerned variables during the time of the Asian Financial Crisis (1997–1998). A VAR for the post-crisis period shows that the impact of oil price volatility is transmitted to budget deficit. The floating exchange rate regime introduced after the crisis may be the key contributor to this new channel of impact.


Statistics for USQ ePrint 7253
Statistics for this ePrint Item
Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Copy of this paper is available upon request from Shuddhasattwa.Rafiq@usq.edu.au
Depositing User: Dr Shuddhasattwa Rafiq
Faculty / Department / School: Current - USQ Other
Date Deposited: 11 Apr 2010 05:12
Last Modified: 29 Aug 2014 05:57
Uncontrolled Keywords: oil price volatility; Thailand; Granger causality test; impulse response function; variance decomposition
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150308 International Business
14 Economics > 1402 Applied Economics > 140205 Environment and Resource Economics
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150202 Financial Econometrics
Socio-Economic Objective (SEO2008): B Economic Development > 91 Economic Framework > 9101 Macroeconomics > 910103 Economic Growth
Identification Number or DOI: doi: 10.1016/j.resourpol.2008.09.001
URI: http://eprints.usq.edu.au/id/eprint/7253

Actions (login required)

View Item Archive Repository Staff Only