Macroeconomic effects of world oil and food price shocks in Asia and Pacific economies: application of SVAR models

Abstract

This study, by employing structural vector auto regression models, investigates the macroeconomic effects of world oil and food price shocks in the context of selected Asia and Pacific countries. The study reveals that the economic activities of resource‐poor countries that specialise in heavy manufacturing industries, like Korea and Taiwan, are highly affected by world oil price shocks. On the other hand, the economic activities of oil‐poor nations such as Australia and New Zealand, with diverse mineral resources other than oil, are not affected by oil price shocks. Furthermore, countries that are oil poor but specialise in international financial services, such as Singapore and Hong Kong, are also not affected by oil price increases. Moreover, some developing countries, in this case, India, with limited reserves of oil are not affected by oil price shocks, whereas other such countries, like Thailand, possessing a number of natural resources other than oil are more strongly affected by oil price shocks. With regard to food price shocks, limited impacts from food price increases can be recorded for India, Korea and Thailand. Overall, the effects of external oil and food prices depend on the economic characteristics of the countries.

Sources of unemployment in Namibia: an application of the structural VAR approach

“…The current study follows existing literature, which typically estimates VARs in levels even when variables are I(1) processes. The unwillingness to impose possibly incorrect restrictions in the model leads to the preference of VARs that are partially explained by Sims et al (1990), Berkelmans (2005) and Alom et al (2013). They argue that even with I(1) variables, residuals are stationary because of the inclusion of lagged levels of variables in the VAR.…”

Macroeconomic Effects of World Energy and Food Price Shocks in South Asia

“…High food and oil prices can affect the living standard of an individual (Bekkers, Brockmeier, Francois, & Yang, 2013).because of the fact that food is a basic need and its demand is relatively inelastic whereas oil prices can affect prices of most commodities consumed by an individual (Alom, Ward, & Hu, 2013).…”

“…Various factors increase the ranks of the middle class by changing consumption patterns to climate change, increasing food prices, the declining of dollar,etc (Carrasco & Mukhopadhyay, 2012).Although, a direct relationship also exists between the energy and food prices (Alom, Ward, & Hu, 2013). Oil and food prices have moved in equivalent.…”

“…Both oil and food prices co-move in international market (Dillon & Barret, 2013).Numerous countries that are oil poor, but healthy established in international financial services are not affected with the increases of oil prices. Same as developing countries which have imperfect reserve are not affected by oil prices (Alom, Ward, & Hu, 2013). Developing countries like India with various natural resources negligibly affected by oil prices shocks due to limited stores of oil.…”

“…Depreciation of the exchange rate to import prices for domestically produced goods and imported inputs, have an impact on domestic inflation. The exchange rate and the output gap are included in the price of oil (Sohrabji, 2011).The researcher explain that increase in oil prices help turn down economic activities of the oil importers countries (Alom, Ward, & Hu, 2013). Some upward countries that are net food importers or have a improved location to agricultural markets of high-income countries have unfavorable effect on the global conditions of trade (Valenzuela, van, & Anderson, 2009).…”