Crude Oil Price Shocks and Macroeconomic Performances in the ASEAN Economies

Abstract

This paper examines the relationship between the crude oil price shocks and the macroeconomic performance in the panel data set of 10 ASEAN economies: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, over the period 1970-2013. We implement a second-generation panel unit root test, the panel cointegration analysis, accounting for multiple structural breaks, the panel dynamic ordinary least squares (PDOLS) estimations, and the panel-causality test in sequence. The empirical findings imply that there is only a statistically significant cointegration between the crude oil prices and the real GDP per capita levels. The results of the panelcausality test also indicate that there is a significant pairwise causal relationship between the levels of crude oil price and the real GDP per capita. In addition, the results of the PDOLS estimations indicate that 10% increase in the crude oil price leads to 1.8% increase in the real GDP per capita in the ASEAN economies in general. Running the common correlated effects panel estimations, we obtain the coefficients for each country and observe that the significant and positive effects are valid in 7 of 10 countries.