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.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Oil price, GDP, ARDL, Nonlinear ARDL, VDC, Singapore
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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