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Would the volatility of oil price affect the GDP of a country ? Singaporean evidence

Ihsaanul, Ahmad and Masih, Mansur (2018): Would the volatility of oil price affect the GDP of a country ? Singaporean evidence.

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Abstract

Singapore is a small and open economy but is highly engaged in oil-related business. This study focuses on testing whether the volatility of oil price would affect the GDP of a country. Singapore is used as a case study. We used ARDL and Nonlinear ARDL for the analysis. Our findings are: i) There is a long-term correlation between Oil and GDP. ii) The Granger causality shows that GDP affects Oil rather than the other way around based on VDC of the ARDL. iii) NARDL shows a positive change in Oil does affect GDP in the long-run. However, a negative change is not significant. iv) There is a long-run asymmetry between Oil and GDP, but only symmetry in the short -run. v) The GDP will fluctuate positively and negatively in the short-run before coming back to equilibrium. Each of the results is given theoretical and logical interpretations.

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