Asymmetric and Nonlinear Pass Through to Industrial Productivity: Does Country’s Dependency on Oil Imports Matter?

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Authors: Salma Bibi, Abdul Rashid, and MirajulHaq
Page Range: 403-426
Published in: International Journal of Energy, Environment, and Economics, Volume 30 Issue 4
ISSN: 1054-853X

Table of Contents

ABSTRACT

The recent turbulent swings in the oil market have heightened oil price volatility and renewed interest in investigating their impact on economic activity. In this context, this study empirically examines the hypothesis that “oil price shocks have asymmetric effects on industrial productivity.” To do so, a dynamic model of common correlated effects was applied to data from oil-importing countries spanning the period from 1990 to 2021. The analysis involved categorizing economies based on their oil imports into both symmetric and asymmetric models, focusing on a sample of 40 oil-importing nations.

The findings affirm the presence of asymmetric and nonlinear effects of oil prices on the industrial production of oil-importing economies. To explore short-term and long-term asymmetry across various levels of oil imports, tests were conducted. The short-term results indicate the absence of asymmetry, while the long-term results provide evidence of asymmetry for economies with the lowest and highest levels of oil imports. Additionally, in oil-importing countries, a positive oil price shock has a smaller impact on industrial productivity compared to a negative oil price shock.

Keywords: Asymmetry, Cross-sectional Dependence test, Dynamic Common Correlated Estimation, oil-importing economies

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