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

Article

Rafiq, Shuddhasattwa, 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. https://doi.org/10.1016/j.resourpol.2008.09.001
Article Title

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

ERA Journal ID4127
Article CategoryArticle
AuthorsRafiq, Shuddhasattwa (Author), Salim, Ruhul A. (Author) and Bloch, Harry (Author)
Journal TitleResources Policy
Journal Citation34 (3), pp. 121-132
Number of Pages12
Year2009
PublisherElsevier
Place of PublicationOxford, United Kingdom
ISSN0301-4207
1873-7641
Digital Object Identifier (DOI)https://doi.org/10.1016/j.resourpol.2008.09.001
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.

Keywordsoil price volatility; Thailand; Granger causality test; impulse response function; variance decomposition
ANZSRC Field of Research 2020350706. International business
380105. Environment and resource economics
350203. Financial econometrics
Public Notes

Copy of this paper is available upon request from Shuddhasattwa.Rafiq@usq.edu.au

Byline AffiliationsCurtin University of Technology
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