The Effect of Exogenous Oil Supply Shocks On Major ASEAN Countries

ISSN: 2232-0172
Vol 4 Issue 1, February 2014

pp. 55-85
A Contemporary Business Journal
The Effect of Exogenous Oil Supply Shocks on Major

ASEAN Countries
Amir Ranjbar*
University Malaya
Saeed Pahlevan Sharif**
Taylors University
Abstract: How do shortfalls in crude oil production caused by wars and other exogenous
political events in oil-producing countries affect oil prices, economic growth and inflation in
major ASEAN countries? In this study, we examine and compare the effects of these shocks
on inflation rate and real growth rate of five major ASEAN countries: Indonesia, Malaysia,
Philippines, Singapore, and Thailand. In addition, the stagflationary effect of those shocks on the
economies of these countries is also studied.
Key words: Oil shocks, economic fluctuations, war, economic growth, ASEAN
JEL classification: C53, F20
1. INTRODUCTION
Economists have long been engrossed in empirical evidence that suggests oil price shocks
may be closely related to macroeconomic performance. The interest in this topic originates
back to the early 1970s and its theory has been shaped by the economic experience of the
1970s and early 1980s. Moreover, 1970s was an era of increasing dependence on imported oil,
unprecedented disruptions in the global oil market and poor macroeconomic performance
in the United States. Thus, it was plausible to suspect a causal relationship between oil prices
and U.S. macroeconomic aggregates.
In view of the above foregoing arguments however, there is no conviction that
exogenous oil supply is to be blamed for the economic malaise of the 1970s. On the basis
of such scenario, it can be predicted that history might repeat itself. However, while the
experience of the 1970s continues to play a major role in the discussions linking oil and
macroeconomy, there have been a number of new oil price shocks since the 1970s. For
example, the 1986 collapse of oil prices, the 2000 boom, and the oil price increases following
the 1990-1991 Gulf war and the 2003 Iraq war. All the above shocks were accompanied by
* Faculty of Business and Accountancy, University Malaya. Email: aranj@perdana.um.edu.my
** Business School, Taylors University. Email: samsharif6@gmail.com
Taylors Business Review, Vol. 4 Issue 1, February 2014
55
Amir Ranjbar and Saeed Pahlevan Sharif
periods of excessive inflation, reduced productivity and lower economic growth. Therefore,
it is even more vital to comprehend the underlying complications related to previous oil
shock episodes and its corresponding effect on macroeconomic aggregates such as inflation
rate and real growth rate.
There is a lot of empirical literature in this field where some consider the price shocks
as the main reason while others consider production shocks. Bruno and Sachs (1985) were
one of the first to analyse in depth the effects of the 1970s oil prices on output and inflation
in major industrialised countries and explored the roles of monetary policy and wage setting.
Hamilton (1983, 1996) showed that most US recessions were caused by an increase in the oil
price. Many other researchers such as Mork (1989), Davis & Haltiwanger (2001), Muellbauer
& Nunziata (2001) and Balke, Brown, & Yucel (2002) have reported a correlation between
the increase in oil prices and subsequent economic downturns. While most of the studies
focused on the US economy, there were also some other studies that looked at the rest of
the world. Cunado & de Gracia (2003) looked at evidence in European countries, while Bohi
(1989) compared the inflation and real output experiences of Japan, Germany, the UK and
the US during the oil supply shocks of the 1970s.
Some other researchers such as Kilian (2006, 2009) assessed systematically the
differences as well as similarities in the responses of G7 economies to exogenous oil supply
shocks. The author exploited oil supply shocks that were exogenous with respect to global
macroeconomic conditions.
On the other hand, some other authors are of the view that the stagflation of the 1970s
was largely due to factors such as monetary policy. Barsky & Kilian (2002) argued that they
may have been partly caused by exogenous changes in the monetary policy, which coincided
with the rise in oil prices. Bernanke, Gertler, & Watson (1997) discussed that the main factor
for the decline in GDP and employment was due to the rise in interest rates, as a result of the
Federals endogenous response to the higher inflation induced by the oil shocks.
In this study, we used the Kilian (2006, 2009) methodology to investigate the effect of
exogenous oil supply disruptions on five major ASEAN countries comprising of Indonesia,
Malaysia, Philippines, Singapore, and Thailand. We wanted to identify the common patterns
in the response of macroeconomic aggregates to exogenous oil supply disruptions Which
ASEAN economies were the most invulnerable to exogenous oil supply shocks and which
have been affected the most? How does real GDP growth respond? How long does it take
for the responses to set in? Are there any systematic differences between the five countries
that produce oil and those that do not? Do exogenous oil supply shocks generate sustained
inflation? Are exogenous oil production shortfalls stagflationary? To what extent can the
poor macroeconomic performance of five ASEAN countries during specific historical
episodes be attributed to exogenous shocks in oil production?
In a section of this paper, the two different available methods to measure the effects
of oil shocks will be discussed. In the section on data, we introduce the structure of the
required data for each of the variables. Then we propose two linear regression models, one
as a base model and the other as an alternative model to estimate the relationship between
exogenous oil supply fluctuations and real growth rate and inflation rate in each of the
countries. Finally, the results and conclusion are presented.
56
The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries
2. IDENTIFYING THE EFFECTS OF EXOGENOUS OIL SUPPLY

DISRUPTIONS
2.1 Oil Price-Based Measures
Early studies sometimes treated the price of oil (or positive changes in the price) as the
measure of exogenous oil supply disruption. Rotemberg & Woodford (1996), Barsky &
Kilian (2002) and Hamilton (2003) proved that at least since 1973, the price of oil has been
endogenous to global macroeconomic conditions and cannot be treated as exogenous.
Although three of the largest oil price increases since the early 1970s occurred near periods
of large exogenous shocks to oil production, not all exogenous oil supply shocks have been
associated with net oil price increases. In addition, it is commonly known that net oil price
increases may arise even in the absence of exogenous political events in the Middle East as a
result of strong demand for industrial commodities at large. Thus, net oil price increases are
not an appropriate measure of exogenous oil supply shocks.
2.2. Oil Production-Based Measures

There are other measures of exogenous oil supply shocks that can be identified using
information on observable changes in the production levels of oil-producing countries that
are subject to exogenous political shocks. For example, according to Hamilton (2003), the
difference in production levels over the period in question is expressed as a share of the
average world oil production in the year, in which the exogenous event started. The resulting
production shortfall is treated as a measure of the magnitude of the shock that occurred
in the first quarter of the exogenous event. An alternative measure of exogenous oil supply
shocks proposed by Kilian (2006) is based on crude oil production data for OPEC countries
and non-OPEC countries that are available from the U.S. Department of Energy. This
measure is based on the observation that any attempt to identify the timing and magnitude of
exogenous production shortfalls requires explicit assumptions about the counterfactual path
of crude oil production in the absence of the exogenous event. Using suitable assumptions
about the counterfactual path of oil production based on the evolution of oil production
in other oil-producing countries, the exogenous production shortfall is constructed as the
difference between the actual path of crude oil production and the counterfactual path. The
change over time in this exogenous production shortfall series (aggregated across OPEC
countries and expressed as a percent share of world oil production) provides a natural
measure of the exogenous oil supply shock. The analysis in this paper utilised the baseline
time series of exogenous oil supply shocks developed by Kilian (2006).
57
3. DATA
3.1. Exogenous Oil Production Shocks
Table 1 shows a list of key dates in oil production.
Table 1. Key dates in oil production
Date
Political event
October 1973
Yom-Kippur war, Arab oil embargo
October 1978
Iranian Revolution
September 1980
Iran-Iraq War
August 1990
Persian Gulf War
December 2002
Civil unrest in Venezuela
March 2003
Iraq War
The measure of exogenous oil supply shocks used in this empirical analysis is based
on monthly crude oil production data by country provided by the U.S. Department of
Energy. The approach can be summarised as follows: Any attempt to identify the timing
and magnitude of an exogenous production shortfall requires explicit assumptions about
the counterfactual path of oil production in the absence of the exogenous event in question.
For a given exogenous event, say a war in some OPEC country, the first step is to
identify a group of oil-producing countries that is subject to the same global macroeconomic
conditions and same economic incentives as the war-stricken country but whose production
is not affected by the war. The countries that belong in this benchmarked group must
be decided on a case by case basis drawing on historical accounts and industry sources.
The counterfactual production level for the country affected by the war is generated by
extrapolating its pre-war production level based on the average growth rate of production in
the benchmarked countries.
Table 2 illustrates the assumptions about the benchmarked countries used in constructing
the counterfactual.
Table 2. Production benchmarks used in constructing the exogenous crude oil production
shortfalls

OPEC countries subject to exogenous production shocks in Jan 1971 - June 2008
Saudi

Algeria Iran Iraq Kuwait Libya Qatar Arabia UAE Venezuela
Jan 1971 - October 1973
Nov 1973 - March 1974
A
A
A
A
A
A
A
Oct 1978 - April 1979
B
B
B
May 1979 - July 1990
B
B
Aug 1990 - March 1991
C
C
C
C
April 1991 - June 2002
C
C
C
July 2002 - Nov 2002
C
C
C
C
Dec 2002 - Oct 2003
D D
D
D
D
Nov 2003 - Sept 2004
D D
D
D
Oct 2014 - June 2006
58
A: Non-OPEC oil producers

B: OPEC excluding Iran, Iraq, and Saudi Arabia
C: OPEC excluding Iran, Iraq, Saudi Arabia and Kuwait
D: OPEC excluding Iran, Iraq, Saudi Arabia, Kuwait and Venezuela
In the second step, the exogenous production shortfall for each OPEC country is
obtained by constructing the difference between actual crude oil production in that country
and the counterfactual crude oil production at each point in time, resulting in a time series
for each of the nine OPEC countries which represents that countrys exogenous shortfall
of crude oil production (Table 2). The aggregate measure of the exogenous crude oil
production shortfall for the whole of OPEC is obtained by summing these time series.
Finally, the exogenous OPEC oil supply shock is constructed by normalising that aggregate
shortfall series as a percent of world crude oil production and taking the first differences.
This approach amounts to treating the exogenous OPEC production shortfall series as a
random walk and is consistent with the lack of serial correlation in the differences.
Figure 1 shows the exogenous OPEC oil supply shock series derived on the basis of Table
2 and suitably aggregated to a quarterly frequency. The major oil dates have been imposed
in Figure 1 as vertical lines. As expected, the most important spikes in the series occur near
those dates. Unlike existing quantitative dummy measures of exogenous oil supply shocks,
the series in Figure 1 contains negative as well as positive shocks. This feature is essential
as many historical production shortfalls triggered by exogenous events have been at least
partially reversed. Thus the corresponding change in the exogenous production shortfall
should be characterised by an initial negative spike followed by one or more subsequent
positive spikes. Only if the exogenous OPEC production shortfall was permanent, would
there be no positive realisations of the oil supply shock measure. As Figure 1 shows, virtually
all exogenous shortfalls were followed by at least a partial reversal. The positive values of the
oil shock measure also reflect the fact that wars in the Middle East may actually cause higher
oil production over time, when the parties involved resort to oil exports to finance the war.
Another key difference is that this new measure allows for repeated exogenous oil supply
shocks of the same sign. A good example is the period following the Persian Gulf War.
Figure 1. Measure of exogenous oil supply shocks
59
3.2. Real GDP and CPI Inflation

The regression analysis is based on seasonally adjusted quarterly real GDP growth and CPI
inflation rates for January 1971-June 2008. The CPI data and the GDP data for Philippines
were obtained from the IFS website. The Singapore GDP data were sourced from Singapore
Statistics, and Malaysia GDP data from Treasury Malaysia. For Indonesia and Thailand, we
used World Bank data.
4. METHODOLOGY
4.1. Base Linear Regression Model
Given a production-based measure of the exogenous oil supply shock, there are two
alternative approaches to quantifying the dynamic effects of exogenous fluctuations in oil
production on macroeconomic aggregates. The first approach (Hamilton, 2003) is to use
lags in the exogenous oil supply shock to identify regressions that relate the macroeconomic
aggregate of interest to past oil price changes and past values of macroeconomic aggregates.
Let xt denote the date t observation of the exogenous oil supply shock series, yt. the
corresponding percent growth rate in real GDP and pt , the percent change in the consumer
price index. The objects of interest are the impulse responses yt +i /xt and pt +i /xt,
i =1, 2, 3, For each country, the first-order effect of a given increase in xt on yt +i and
pt +i , respectively, may be computed based on the fitted value of the linear ordinary least
squares (OLS) regressions:

i =1
ti
j=0
i =1
tj
+ ut
(1)
p + h x
pt = +

y + x
yt = +
ti
tj
+ vt
(2)
j=0
where the error terms ut and vt are serially uncorrelated, given the inclusion of four lags
of the dependent variable and eight lags of the exogenous oil supply shock. Provided that
the exogenous oil supply shock regressors are not correlated with any omitted exogenous
variables, the implied impulse responses will measure the causal effects of the exogenous
variations in oil supply.
The estimated responses provide a measure of the expected response of macroeconomic
aggregates to exogenous oil production shortfalls based on historical data. They represent
consistent estimates of the causal effects of a unit change in the exogenous oil supply shock
measure.
4.1.1 Testing the Specification of the Baseline Model

In models (1) and (2), we first need to prove that the oil production shock is predetermined. Consider the following models:
60
1i
xt i +
2i
xt i +
xt = z t +

z t = gxt +

z + e1t
(3)
z + e2t
(4)
1j t j
2j t j
Equations (3) and (4) are representatives of a bidirectional relationship. Equation (3)
shows the effect of growth rate in real GDP or Consumer Price Index on oil production
shocks while equation (4) shows the reverse effect. We say that xt is pre-determined if
= 0. If 1j=0 j. Under strict exogeneity, there is no current or lagging feedback from z t
to xt , and we can consistently estimate the effect of a change in xt on z t based on equation
(4) alone. The equations (1) and (2) above are specific examples of equation (4).
A central proposition of this paper is that xt is strictly exogenous as described in section
2. Strict exogeneity involves two conditions: (1) Pre-determinedness of the oil supply shock
series and (2) Granger non-causality from macroeconomic aggregates to the oil supply shock
series. While the second condition is testable, the first one is not. Table 3 reports asymptotic
p-values for the same type of Granger non-causality tests applied to xt.
Table 3. p-Values of Granger Non-Causality Tests
H0: 1j=0 j

Lagged Real GDP Growth
Indonesia
Malaysia
Philippines
Singapore
Thailand
Lagged CPI Inflation
0.528
0.899
0.434
0.960
0.246
0.911
0.737
0.561
0.159
0.325
Table 3 shows that the null of no Granger causality cannot be rejected at the 5% level
for any country. The p-values range from 24% to 96% in lagged real GDP growth and they
range from 16% to 91% in lagged CPI inflation. These test results suggest that the data are
consistent with the absence of feedback from inflation and real growth to the oil shock
series, as required by strict exogeneity.
Equation (4) in general allows for a contemporaneous effect from xt on z t . Table 4
formally tests the null that = 0 in equation (4). There is no evidence of a contemporaneous
link from the exogenous oil supply shock to CPI inflation. No test result is significant at the
5% level. The p-values range from 5.3% to 93.4%, depending on the country. For real GDP
growth, p-values generally range from 5.3% to 52%, except for Indonesia and Philippines,
suggesting that the contemporaneous regressor may be safely omitted from equations (1)
and (2). It seems implausible that a contemporaneous link would exist only for two countries
and not for any other country. In the baseline results reported below, we therefore impose
= 0 for all regressions.
61
Table 4. p-values of tests for the exclusion of the contemporaneous effect of the

exogenous oil supply shock
H0: = 0
Real GDP Growth

Indonesia
Malaysia
Philippines
Singapore
Thailand
0.027
0.527
0.009
0.053
0.368
CPI Inflation
0.095
0.934
0.478
0.053
0.782
4.2. Alternative Linear Regression Model

Kilian (2006) proposed an alternative regression approach that will form the basis of the
analysis in this paper. This alternative approach follows the convention in the literature of
treating changes to oil production induced by political events such as wars or revolutions
in the Middle East as exogenous with respect to macroeconomic aggregates. Specifically, it
treats the oil supply shock series as strictly exogenous in the sense that there is no feedback
from current or lagging values of the dependent variable to the exogenous variable.

12
fx
yt = +

tj
+ ut
(5)
12
yx
pt = d +

i =1
i =1
tj
+ vt
(6)
That model shares with the baseline model the assumption that xt is predetermined. It differs
from the baseline model in that it does not impose the Granger non-causality restriction.
Equation (5) also relaxes the assumption that the data are well approximated by a linear VAR
representation. Thus, it is of some interest to compare the response estimates from the
alternative regression models (5) and (6) to the estimates from the more tightly parameterised
baseline models (1) and (2). As in the baseline model, there is no instantaneous feedback
from t and x to inflation and real growth.
5 RESULTS
5.1 Real Growth and Inflation Responses in the Baseline Model
Using the estimates of models (1) and (2), assessing the impact of an exogenous 1%
reduction in global oil production by simulation became more straightforward. The dynamic
responses to an exogenous 1% permanent reduction in crude oil production are shown in
Table 5 along with the corresponding response levels of real GDP and CPI.
62
5.1.1 Indonesia
In Indonesia, the exogenous oil supply shocks showed its negative effect on real GDP rate
exactly one quarter after the event and no effect thereafter. This effect took place sooner
in comparison with other countries. Also, the shocks had a positive effect on inflation only
after one quarter.
5.1.2 Malaysia
For Malaysia, the real GDP growth had two different reactions. On one hand, we saw a
significant negative effect in the second quarter after the shocks. On the other hand, the fifth
and sixth quarters showed a significant positive reaction to the shocks. Similar to Indonesia,
we observed a significant increase in the inflation rate after one quarter.
5.1.3 Philippines
In Philippines, we only observed a significant decrease in real GDP growth after eight
quarters, and surprisingly, there were significant increases in four to six quarters after the
shock period. Also, in contrast to all the other countries, not only the shocks did not cause
any increase in the inflation rate, but there was a decrease after one quarter. The observations
revealed completely different reactions in Philippines.
5.1.4 Singapore
In Singapore, a significant negative effect of exogenous oil shocks on real GDP growth was
observed at the fourth quarter after the shock and the inflation rate had a significant increase
after the sixth quarter.
5.1.5 Thailand
In Thailand, we observed two different reactions. On one hand, there were significant drops
at 5% level in the second and seventh quarters after the shocks, while on the other hand, the
real GDP growth had significant increases in the fourth and fifth quarters.
Table 5. Dynamic effect of a permanent 1% world oil supply disruption. OLS point

estimates from baseline model
Country

Significant Growth Lags

Lag t-statistics p-value
Significant Inflation Lags

Indonesia
Malaysia

Philippines

Singapore

1
2
5
6
4
5
6
8
1
4
1
2
-2.199
-2.641
0.0296
0.0093
-2.311674
0.0224
2.020
0.0455
-3.229
-4.578
2.170
3.551
2.586
2.534
2.324
-2.931
2.729
-2.933
0.0016
0.0000
0.0318
0.0005
0.0108
0.0125
0.0217
0.0040
0.0072
0.0040
63
Table 5 (cont)
Country

Thailand

2
4
5
7
-3.316
3.202
4.971
-2.706
0.0012
0.0017
0.0000
0.0077

-
5.1.6 Quantifying the Stagflationary Effects in the Baseline Model

A popular notion is that exogenous oil supply shocks can be held responsible for triggering
stagflation, defined as the simultaneous event of rising price levels and falling output.
Figure 2 provides a formal assessment of this proposition based on the conditional comovement measure proposed by Den Haan (2000). In Figure 2, this measure was applied to
the responses of CPI inflation and real GDP growth to an exogenous oil supply disruption.
Following Den Haan and Summer (2004), the plot shows conditional covariances rather than
conditional correlations. This normalisation facilitates a comparison of the statistics across
horizons. The conditional covariance at horizon, h, is constructed as

imp imp
c(h) = yh ph
(7)
imp
where z h denotes the response of variable z t at horizon h to a 1% exogenous oil supply

disruption. Stagflation in the form of rising prices and falling output will cause this measure
to be negative.
Figure 2. Stagflationary effects of a 1% world oil supply disruption in baseline model

64
5.2 Real Growth and Inflation Responses in the Alternative Model

Given estimates of models (5) and (6), it was straightforward to assess the impact of an
exogenous 1% reduction in global oil production by simulation. The dynamic responses to
an exogenous 1% permanent reduction in crude oil production are shown in Table 6 along
with the corresponding responses of the real GDP and CPI levels.
5.2.1 Indonesia
In the case of Indonesia, the alternative model showed the same effect as baseline model for
real GDP growth. We observed a decrease in real GDP growth after one quarter. However,
in contrast with the baseline model, we did not observe any significant CPI inflation in any
quarter.
5.2.2 Malaysia
For Malaysia, the alternative model showed a significant decrease in real GDP growth
in the second quarter after the shocks. This finding was in accordance with the baseline
model. However, unlike the baseline model in which the fifth and sixth quarters showed
a significant positive reaction to the shocks, in the alternative model, we did not observe
such a relationship. Similar to the baseline model, we observed a significant increase in the
inflation rate after one quarter. Also, the alternative model showed a significant decrease in
the inflation rate in the ninth quarter.
5.2.3 Philippines
For Philippines, we only observed a significant decrease in real GDP growth after eight
quarters, exactly the same as the baseline model; and surprisingly, there were significant
increases in four to six quarters after the shock periods. We observed a decrease in the
inflation rate after one quarter, again the same as baseline model. So the results of the two
models were the same for Philippines.
5.2.4 Singapore
The results of the alternative model were completely different in the Singapore case. For
example, in the baseline model, we observed a significant negative effect of exogenous oil
shocks on real GDP growth in the fourth quarter whereas in the alternative model, we have
it in the tenth quarter and in contrast, we observed increases in real GDP growth in one and
nine quarters after the shocks. Also, the inflation rate had a significant decrease in the third
and fourth quarters.
5.2.5 Thailand
In Thailand, we observed two different reactions. On one hand, there were significant drops
at 5% in first, second, third and eighth quarters after shocks, while on the other hand, the
real GDP growth had significant increases in the fifth and sixth quarters.
Table 6 shows the response estimates obtained from the alternative model in equations
(5) and (6).
65
Table 6. Dynamic effect of a permanent 1% world oil supply disruption. OLS point

estimates from alternative model
Country

Lag Coefficient t-statistics p-value
Indonesia 1
-0.563
-3.870
0.0002
Malaysia 2
-0.899
-3.219
0.0016

Philippines 4
0.388
2.450
0.0157

6
0.383
2.422
0.0169

8
-0.402
-2.517
0.0131
Singapore 1
0.605
2.861
0.0049

9
0.474
2.241
0.0268

12 -0.472
-2.199
0.0297
Thailand 1
-0.289
-2.113
0.0366

2
-0.497
-3.628
0.0004

3
-0.278
-2.018
0.0458

5
0.714
5.230
0.0000

6
0.352
2.595
0.0106

8
-0.328
-2.393
0.0182
Lag
-
1
9
1
10

Coefficient t-statistics p-value
-
-
0.185
-2.768
0.0065
-0.135
-2.023
0.0452
-0.444
-2.121
0.0359
0.490
2.311
0.0225
3
4
-0.263
-0.217
-3.189
-2.659
0.0018
0.0089
2
4
-0.342
-0.244
-2.990
-2.144
0.0034
0.0340
5.2.6 Quantifying the Stagflationary Effects in the Alternative Model

Figure 3 shows the stagflationary effects in the alternative model. These results were also
based on equation 7.
Figure 3. Stagflationary effects of a 1% world oil supply disruption in alternative model

66
5.3 Model Selection Results

The evidence in Table 5 and Table 6 suggest that there are some differences in the results for
real GDP growth and inflation rate; therefore, the need to compare formally the fit of these
two models. Given that both of our models contain exactly the same number of parameters,
their ranking by the prediction mean squared error is identical to the ranking according to
any information criterion.
Table 7. Comparison of the fit of the baseline and alternative models
Prediction Mean Squared Error of Fitted Model

Real GDP Growth
CPI Inflation

Baseline
Alternative
Baseline
Alternative
Indonesia
2.997
2.953
10.423
10.219
Malaysia
10.835
10.869
0.918
0.622
Philippines
3.512
3.538
2.686
6.126
Singapore
6.872
6.250
1.664
0.931
Thailand
2.632
2.610
1.965
1.351
Table 7 shows that for real GDP growth, neither model fits the data better for all
countries. Since the empirical results for real GDP growth are very similar in any case, this
means that for real GDP growth, we can focus on the alternative model without loss of
generality.
In sharp contrast, for CPI inflation, the alternative model fits the data better than the
baseline model for four countries. The improvement in fit can be substantial. Thus, based on
the differences in the results for CPI inflation, the formal model selection criteria in Table
7 established conclusively that the baseline regression which imposes additional structure
on the data has more statistical support. The next section will focus on the results from the
baseline regression.
5.4 Comparing the Effects of Exogenous Oil Supply Shocks Across Countries
and Time
Figures 4 and 5 characterise the aftermath of each of the exogenous events shown in
Table 2. Each column refers to a different exogenous event, starting with the 1973/74 oil
shock and ending with the oil crises of 2002/2003. The first line for each country and
episode shows average real GDP growth and average CPI inflation rates. All rates have been
normalised relative to their respective averages for the period January 1971-June 2008 such
that a negative value corresponds to below average rates. The second line shows the average
effect on real GDP growth and CPI inflation caused by exogenous oil supply shocks over
the same sub-periods. All rates have been annualised. The corresponding time series plots
are shown in Figures 4 and 5.
67

April 2002-March 2004 March 1990-March 1993
April 1980-Jan 1983
April 1978-March 1980
68
April 1973-Feb 1975
Figure 4. Comparison of real growth experienced by oil shock episodes

Figure 5. Comparison of CPI inflation experienced by oil shock episodes
April 2002-March 2004 March 1990-March 1993
April 1980-Jan 1983
April 1978-March 1980
69
April 1973-Feb 1975
6. CONCLUSION
This study estimated and compared the effects of exogenous shocks in global oil production
on inflation and real output in major ASEAN countries. This comparison suggests a fair
degree of similarity in the real growth responses in Indonesia, Malaysia, and Thailand which
show a rapid reaction to the shocks, while this reaction is more slower in Singapore and
Thailand. With regard to inflation, the reactions were also different. While Malaysia and
Indonesia had quick significant increases in Consumer Price Index after one or two quarters,
Singapore only experienced the same reaction after six quarters. In contrast, Thailand did
not show any significant reaction to its inflation rate while surprisingly, the Consumer Price
Index showed a decrease in Philippines.
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71
Appendix 1 (Regression Results)

A.1. Base Model
A.1.1. Indonesia
Dependent Variable: GROWTH
Method: Least Squares
Date: 10/29/08 Time: 18:49
Sample (adjusted): 1973Q1 2008Q2
Included observations: 142 after adjustments
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
GROWTH(-1)
GROWTH(-2)
GROWTH(-3)
GROWTH(-4)
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
0.959611
0.234927
-0.078749
0.146025
0.033496
-0.460196
-0.056643
0.187358
0.071355
0.167523
0.079605
-0.101237
0.072022
0.258204
0.089608
0.091253
0.089155
0.087560
0.142522
0.149194
0.148455
0.148336
0.145362
0.138518
0.139590
0.140333
3.716476
2.621705
-0.862967
1.637889
0.382553
-3.228955
-0.379663
1.262057
0.481040
1.152456
0.574695
-0.725246
0.513223
0.0003
0.0098
0.3898
0.1039
0.7027
0.0016
0.7048
0.2092
0.6313
0.2513
0.5665
0.4696
0.6087
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.183080
0.107088
1.748246
394.2709
-273.9953
1.996212
Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
F-statistic
Prob(F-statistic)
1.447638
1.850113
4.042187
4.312791
2.409191
0.007548
Dependent Variable: INFLATION

Date: 10/29/08 Time: 18:52
72
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
INFLATION(-1)
INFLATION(-2)
INFLATION(-3)
INFLATION(-4)
1.319873
0.561703
0.082784
-0.053851
-0.047560
0.368662
0.080002
0.090253
0.089822
0.079231
3.580172
7.021130
0.917245
-0.599530
-0.600265
0.0005
0.0000
0.3607
0.5499
0.5494
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.479220
0.022164
0.079964
0.086813
-0.183029
0.213099
-0.092700
0.081472
0.217846
0.219109
0.215289
0.215346
0.210723
0.211261
0.217064
0.219248
-2.199814
0.101153
0.371425
0.403131
-0.868577
1.008698
-0.427063
0.371599
0.381243
0.323684
2.707647
945.7441
-336.1156
1.892191
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.0296
0.9196
0.7109
0.6875
0.3867
0.3150
0.6700
0.7108
3.017788
3.292434
4.917121
5.187725
6.623533
0.000000
A.1.2. Malaysia
Date: 10/30/08 Time: 21:27
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
GROWTH(-1)
GROWTH(-2)
GROWTH(-3)
GROWTH(-4)
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
1.690875
-0.048128
-0.312491
-0.034519
0.367713
-0.383877
-1.015977
-0.052614
-0.270484
0.500242
0.820627
0.065138
-0.058935
0.411360
0.081899
0.081690
0.080789
0.080548
0.222241
0.221903
0.235485
0.235053
0.230505
0.231067
0.228398
0.228062
4.110448
-0.587654
-3.825347
-0.427277
4.565159
-1.727301
-4.578475
-0.223430
-1.150738
2.170205
3.551475
0.285194
-0.258416
0.0001
0.5578
0.0002
0.6699
0.0000
0.0865
0.0000
0.8236
0.2520
0.0318
0.0005
0.7760
0.7965
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.434845
0.382273
2.787278
1002.191
-340.2316
1.907732
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
1.661096
3.546354
4.975092
5.245696
8.271346
0.000000
73

Date: 10/30/08 Time: 21:31
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
INFLATION(-1)
INFLATION(-2)
INFLATION(-3)
INFLATION(-4)
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
0.266601
0.461367
0.258073
-0.177037
0.171829
0.167792
-0.008615
-0.008470
-0.068771
-0.029995
0.019011
0.011566
-0.008606
0.105670
0.087106
0.095342
0.095301
0.086857
0.063535
0.064970
0.064016
0.063838
0.063195
0.062483
0.063733
0.064233
2.522951
5.296640
2.706823
-1.857668
1.978284
-2.640956
-0.132602
-0.132307
-1.077285
-0.474636
0.304252
0.181479
-0.133984
0.0129
0.0000
0.0077
0.0655
0.0500
0.0093
0.8947
0.8949
0.2834
0.6358
0.7614
0.8563
0.8936
0.438278
0.386025
0.795339
81.60084
-162.1562
1.897450
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.965032
1.015026
2.466988
2.737592
8.387581
0.000000
A.1.3. Philippines
Date: 10/30/08 Time: 21:34
74
Variable
Coefficient
Std. Error
t-Statistic
Prob
C
GROWTH(-1)
GROWTH(-2)
GROWTH(-3)
GROWTH(-4)
OIL(-1)
OIL(-2)
0.741472
0.014650
0.001339
0.242355
0.018078
0.023396
-0.138887
0.230835
0.087660
0.086701
0.085963
0.087052
0.157491
0.157214
3.212134
0.167123
0.015448
2.819291
0.207671
0.148554
-0.883428
0.0017
0.8675
0.9877
0.0056
0.8358
0.8821
0.3786
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.139746
0.403452
0.388742
0.364999
-0.197487
-0.474024
0.155900
0.156012
0.153421
0.157069
0.162484
0.161742
0.896380
2.586033
2.533823
2.323805
-1.215425
-2.930739
0.194445
0.119510
1.919750
475.4219
-287.2839
1.977460
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.3717
0.0108
0.0125
0.0217
0.2264
0.0040
0.974268
2.045891
4.229351
4.499955
2.594843
0.004015

Date: 10/30/08 Time: 21:37
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
INFLATION(-1)
INFLATION(-2)
INFLATION(-3)
INFLATION(-4)
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
1.085431
0.484774
0.499503
-0.311675
-0.079456
-0.364489
0.023233
0.029306
0.007710
-0.030048
0.098086
-0.049932
0.192437
0.257026
0.085376
0.090165
0.087812
0.084568
0.157673
0.159142
0.156947
0.156870
0.156022
0.154690
0.157823
0.158981
4.223041
5.678073
5.539877
-3.549325
-0.939552
-2.311674
0.145987
0.186726
0.049147
-0.192587
0.634079
-0.316380
1.210439
0.0000
0.0000
0.0000
0.0005
0.3492
0.0224
0.8842
0.8522
0.9609
0.8476
0.5272
0.7522
0.2283
0.532852
0.489397
1.965685
498.4455
-290.6416
1.870432
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
2.601979
2.750883
4.276643
4.547247
12.26199
0.000000
75
A.1.4. Singapore
Date: 10/30/08 Time: 21:44
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
GROWTH(-1)
GROWTH(-2)
GROWTH(-3)
GROWTH(-4)
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
1.978261
0.061164
0.018981
0.058153
-0.249821
0.592275
-0.026448
-0.096758
-0.636797
-0.132003
0.214328
0.380468
0.054332
0.359249
0.084841
0.083295
0.083124
0.080438
0.217061
0.222100
0.217484
0.217146
0.217630
0.215339
0.220290
0.223758
5.506664
0.720930
0.227881
0.699588
-3.105761
2.728608
-0.119082
-0.444899
-2.932571
-0.606549
0.995305
1.727124
0.242815
0.0000
0.4723
0.8201
0.4854
0.0023
0.0072
0.9054
0.6571
0.0040
0.5452
0.3215
0.0865
0.8085
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.181163
0.104992
2.701828
941.6840
-335.8101
2.082112
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
1.770113
2.855908
4.912818
5.183422
2.378370
0.008373

Date: 10/30/08 Time: 21:46
76
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
INFLATION(-1)
INFLATION(-2)
INFLATION(-3)
INFLATION(-4)
0.193451
0.610908
0.343707
-0.288353
0.055735
0.099737
0.088285
0.101692
0.096437
0.084969
1.939602
6.919693
3.379882
-2.990064
0.655949
0.0546
0.0000
0.0010
0.0033
0.5130
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
-0.056901
-0.133264
-0.118242
-0.023518
0.001065
0.160208
-0.042423
-0.033704
0.081637
0.080333
0.079232
0.079303
0.079166
0.079313
0.082712
0.083773
-0.697004
-1.658905
-1.492357
-0.296564
0.013459
2.019934
-0.512900
-0.402321
0.582291
0.543434
1.003373
129.8716
-195.1503
1.997292
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.4871
0.0996
0.1380
0.7673
0.9893
0.0455
0.6089
0.6881
0.773081
1.484945
2.931695
3.202299
14.98560
0.000000
A.1.5. Thailand
Date: 10/30/08 Time: 21:48
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
GROWTH(-1)
GROWTH(-2)
GROWTH(-3)
GROWTH(-4)
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
0.683445
0.379611
0.102755
-0.071109
0.115373
-0.164035
-0.414984
-0.070975
0.399061
0.631808
0.111742
-0.368496
-0.281724
0.220429
0.087919
0.093116
0.093911
0.082391
0.125229
0.125165
0.124839
0.124635
0.127104
0.135344
0.136191
0.135086
3.100524
4.317758
1.103522
-0.757189
1.400320
-1.309883
-3.315503
-0.568531
3.201832
4.970803
0.825610
-2.705730
-2.085510
0.0024
0.0000
0.2719
0.4503
0.1638
0.1926
0.0012
0.5707
0.0017
0.0000
0.4105
0.0077
0.0390
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.437196
0.384842
1.533854
303.4993
-255.4175
1.932777
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
1.486738
1.955648
3.780528
4.051132
8.350779
0.000000
77

Date: 10/30/08 Time: 21:51
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
INFLATION(-1)
INFLATION(-2)
INFLATION(-3)
INFLATION(-4)
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
0.391865
0.570007
0.113258
-0.083851
0.112710
-0.161454
-0.168380
0.052520
-0.128496
-0.016191
0.110152
0.011933
-0.075684
0.151050
0.089067
0.104234
0.107224
0.092780
0.096233
0.097510
0.094302
0.094127
0.093739
0.094016
0.095249
0.095244
2.594280
6.399747
1.086573
-0.782021
1.214814
-1.677744
-1.726794
0.556933
-1.365133
-0.172723
1.171626
0.125277
-0.794631
0.0106
0.0000
0.2793
0.4356
0.2267
0.0958
0.0866
0.5785
0.1746
0.8631
0.2435
0.9005
0.4283
0.474327
0.425427
1.165580
175.2563
-216.4293
1.917768
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
1.406262
1.537692
3.231398
3.502002
9.699964
0.000000
A.2. Alternative Model

A.2.1.Indonesia
Date: 10/30/08 Time: 23:37
78
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
1.396335
-0.562756
-0.183675
0.128582
0.156791
0.145418
0.145593
0.146600
8.905699
-3.869926
-1.261563
0.877092
0.0000
0.0002
0.2095
0.3821
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
-0.027558
0.116759
0.134218
-0.099060
0.049266
-0.083654
-0.171651
0.049101
0.048631
0.145036
0.145299
0.144368
0.144317
0.145750
0.145406
0.147136
0.147048
0.147432
-0.190012
0.803574
0.929692
-0.686404
0.338014
-0.575314
-1.166615
0.333914
0.329852
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.135897
0.052943
1.805590
407.5195
-270.5291
1.514920
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.8496
0.4232
0.3543
0.4937
0.7359
0.5661
0.2456
0.7390
0.7421
1.420940
1.855372
4.109118
4.384874
1.638220
0.089188

Date: 10/30/08 Time: 23:47
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
2.858346
-0.239037
-0.059185
-0.020487
0.052624
-0.166718
0.143377
0.027146
0.061964
-0.153866
-0.127777
-0.138114
-0.041693
0.291667
0.270510
0.270836
0.272709
0.269799
0.270290
0.268557
0.268463
0.271129
0.270488
0.273707
0.273543
0.274258
9.800023
-0.883651
-0.218527
-0.075124
0.195049
-0.616812
0.533877
0.101116
0.228539
-0.568847
-0.466839
-0.504907
-0.152020
0.0000
0.3786
0.8274
0.9402
0.8457
0.5385
0.5944
0.9196
0.8196
0.5705
0.6414
0.6145
0.8794
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.019125
-0.075039
3.358808
1410.199
-356.1856
0.779321
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
2.889794
3.239464
5.350515
5.626271
0.203107
0.998128
79
A.2.2. Malaysia
Date: 10/31/08 Time: 00:00
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
1.579495
-0.272760
-0.899204
-0.037095
-0.048943
0.443284
0.453563
-0.039222
-0.319192
-0.327576
0.231961
0.006059
-0.242896
0.300798
0.278979
0.279315
0.281247
0.278245
0.278752
0.276965
0.276867
0.279617
0.278956
0.282275
0.282106
0.282843
5.251015
-0.977711
-3.219319
-0.131895
-0.175899
1.590246
1.637619
-0.141663
-1.141534
-1.174293
0.821754
0.021479
-0.858763
0.0000
0.3301
0.0016
0.8953
0.8607
0.1143
0.1040
0.8876
0.2558
0.2425
0.4128
0.9829
0.3921
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.144391
0.062253
3.463958
1499.875
-360.4395
2.058678
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)

Date: 10/31/08 Time: 00:02
Variable
Coefficient
Std. Error
C
0.823382
0.071973
OIL(-1)
0.184796
0.066752
OIL(-2)
-0.070189
0.066833
OIL(-3)
-0.115122
0.067295
OIL(-4)
-0.109092
0.066577
OIL(-5)
-0.123818
0.066698
OIL(-6)
-0.056932
0.066270
OIL(-7)
-0.046997
0.066247
OIL(-8)
-0.049269
0.066905
80
t-Statistic
11.44015
-2.768389
-1.050217
-1.710717
-1.638593
-1.856397
-0.859082
-0.709430
-0.736405
1.627331
3.577088
5.412166
5.687922
1.757900
0.062407
Prob.
0.0000
0.0065
0.2956
0.0896
0.1038
0.0658
0.3919
0.4794
0.4629
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
-0.135022
-0.069226
-0.058482
-0.007236
0.066747
0.067541
0.067500
0.067677
-2.022902
-1.024945
-0.866397
-0.106919
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.141417
0.058993
0.828833
85.87045
-163.0790
1.268433
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.0452
0.3074
0.3879
0.9150
0.875926
0.854418
2.551869
2.827625
1.715728
0.070869
A.2.3. Philippines
Date: 10/31/08 Time: 00:06
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
0.960338
0.058801
-0.210418
0.045677
0.388883
0.313789
0.382712
-0.076636
-0.401606
0.096967
-0.087097
-0.197881
0.006789
0.171617
0.159168
0.159360
0.160462
0.158750
0.159039
0.158020
0.157964
0.159533
0.159155
0.161049
0.160953
0.161373
5.595807
0.369424
-1.320390
0.284656
2.449655
1.973034
2.421925
-0.485149
-2.517391
0.609257
-0.540808
-1.229434
0.042071
0.0000
0.7124
0.1891
0.7764
0.0157
0.0507
0.0169
0.6284
0.0131
0.5435
0.5896
0.2212
0.9665
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.160758
0.080191
1.976326
488.2333
-282.9978
1.951065
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.939834
2.060677
4.289822
4.565578
1.995329
0.029810
81

Date: 10/31/08 Time: 00:10
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
2.492169
-0.444282
-0.160866
-0.335478
-0.060848
-0.085445
0.105831
-0.021746
0.309926
0.214293
0.489717
0.263430
0.102970
0.225835
0.209453
0.209706
0.211156
0.208903
0.209283
0.207941
0.207868
0.209932
0.209436
0.211928
0.211801
0.212355
11.03537
-2.121155
-0.767104
-1.588769
-0.291276
-0.408275
0.508949
-0.104615
1.476314
1.023193
2.310771
1.243759
0.484897
0.0000
0.0359
0.4445
0.1146
0.7713
0.6838
0.6117
0.9168
0.1424
0.3082
0.0225
0.2159
0.6286
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.128692
0.045047
2.600688
845.4474
-320.8838
0.761812
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
2.475199
2.661321
4.838895
5.114651
1.538544
0.118925
A.2.4. Singapore
Date: 10/31/08 Time: 00:29
82
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
1.753955
0.605336
-0.079214
-0.142479
-0.413864
-0.296461
0.228094
0.211549
0.211804
0.213269
0.210993
0.211377
7.689602
2.861451
-0.373999
-0.668075
-1.961508
-1.402525
0.0000
0.0049
0.7090
0.5053
0.0520
0.1632
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
0.054256
0.389345
0.254948
0.473945
0.308891
-0.295563
-0.471581
0.210022
0.209947
0.212033
0.211531
0.214049
0.213920
0.214479
0.258336
1.854490
1.202401
2.240542
1.443088
-1.381651
-2.198724
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.207213
0.131105
2.626709
862.4502
-322.2577
1.944438
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.7966
0.0660
0.2315
0.0268
0.1515
0.1695
0.0297
1.741773
2.817918
4.858807
5.134562
2.722631
0.002648

Date: 10/31/08 Time: 00:32
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
0.546137
-0.089035
-0.133607
-0.262528
-0.216552
-0.158686
0.042266
-0.035595
0.005039
-0.091680
-0.044558
0.003677
-0.043155
0.088049
0.081662
0.081761
0.082326
0.081448
0.081596
0.081073
0.081044
0.081849
0.081656
0.082627
0.082578
0.082794
6.202633
-1.090289
-1.634117
-3.188883
-2.658784
-1.944777
0.521328
-0.439202
0.061561
-1.122765
-0.539268
0.044527
-0.521239
0.0000
0.2777
0.1048
0.0018
0.0089
0.0540
0.6031
0.6613
0.9510
0.2637
0.5907
0.9646
0.6031
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.151793
0.070366
1.013965
128.5156
-190.9005
1.115256
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.600868
1.051639
2.955080
3.230835
1.864146
0.045041
83
A.2.5. Thailand
Date: 10/31/08 Time: 00:35
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
1.431817
-0.288904
-0.496614
-0.278087
0.216776
0.714420
0.352172
-0.240370
-0.327934
-0.115870
-0.128798
0.020084
-0.078581
0.147399
0.136707
0.136872
0.137818
0.136348
0.136596
0.135720
0.135672
0.137019
0.136696
0.138322
0.138239
0.138601
9.713889
-2.113314
-3.628318
-2.017780
1.589878
5.230189
2.594844
-1.771702
-2.393339
-0.847653
-0.931143
0.145285
-0.566960
0.0000
0.0366
0.0004
0.0458
0.1144
0.0000
0.0106
0.0789
0.0182
0.3983
0.3536
0.8847
0.5718
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.323237
0.258268
1.697429
360.1583
-262.0045
1.161022
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
1.458246
1.970917
3.985573
4.261329
4.975242
0.000001

Date: 10/31/08 Time: 00:39
84
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
OIL(-1)
OIL(-2)
OIL(-3)
OIL(-4)
OIL(-5)
OIL(-6)
1.234733
-0.183759
-0.342239
-0.140006
-0.244426
-0.190385
-0.033777
0.123244
0.114304
0.114442
0.115233
0.114003
0.114211
0.113479
10.01863
-1.607634
-2.990508
-1.214978
-2.144019
-1.666962
-0.297648
0.0000
0.1104
0.0034
0.2267
0.0340
0.0980
0.7665
OIL(-7)
OIL(-8)
OIL(-9)
OIL(-10)
OIL(-11)
OIL(-12)
-0.009406
-0.110764
0.002088
-0.126727
-0.123428
-0.035112
0.113439
0.114565
0.114294
0.115655
0.115585
0.115887
-0.082913
-0.966819
0.018268
-1.095739
-1.067853
-0.302987
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.130344
0.046857
1.419261
251.7878
-237.3055
0.800269
Mean dependent var

S.D. dependent var
Schwarz criterion
F-statistic
Prob(F-statistic)
0.9341
0.3355
0.9855
0.2753
0.2876
0.7624
1.314057
1.453728
3.627616
3.903372
1.561246
0.111474
85

The Effect of Exogenous Oil Supply Shocks On Major ASEAN Countries

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The Effect of Exogenous Oil Supply Shocks On Major ASEAN Countries

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ISSN: 2232-0172

Vol 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major

Taylors Business Review, Vol. 4 Issue 1, February 2014

Amir Ranjbar and Saeed Pahlevan Sharif

Taylors Business Review, Vol. 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

2. IDENTIFYING THE EFFECTS OF EXOGENOUS OIL SUPPLY

2.2. Oil Production-Based Measures

Taylors Business Review, Vol. 4 Issue 1, February 2014

Amir Ranjbar and Saeed Pahlevan Sharif

Taylors Business Review, Vol. 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

A: Non-OPEC oil producers

Figure 1. Measure of exogenous oil supply shocks

Taylors Business Review, Vol. 4 Issue 1, February 2014

Amir Ranjbar and Saeed Pahlevan Sharif

3.2. Real GDP and CPI Inflation

4.1.1 Testing the Specification of the Baseline Model

Taylors Business Review, Vol. 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

Lagged CPI Inflation

Taylors Business Review, Vol. 4 Issue 1, February 2014

Amir Ranjbar and Saeed Pahlevan Sharif

4.2. Alternative Linear Regression Model

Taylors Business Review, Vol. 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

Significant Growth Lags

Significant Inflation Lags

Taylors Business Review, Vol. 4 Issue 1, February 2014

Amir Ranjbar and Saeed Pahlevan Sharif

Significant Inflation Lags

5.1.6 Quantifying the Stagflationary Effects in the Baseline Model

where z h denotes the response of variable z t at horizon h to a 1% exogenous oil supply

Figure 2. Stagflationary effects of a 1% world oil supply disruption in baseline model

Taylors Business Review, Vol. 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

5.2 Real Growth and Inflation Responses in the Alternative Model

Taylors Business Review, Vol. 4 Issue 1, February 2014

Amir Ranjbar and Saeed Pahlevan Sharif

Significant Inflation Lags

5.2.6 Quantifying the Stagflationary Effects in the Alternative Model

Figure 3. Stagflationary effects of a 1% world oil supply disruption in alternative model

Taylors Business Review, Vol. 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

5.3 Model Selection Results

Taylors Business Review, Vol. 4 Issue 1, February 2014

Taylors Business Review, Vol. 4 Issue 1, February 2014

April 1980-Jan 1983

April 1978-March 1980

Figure 4. Comparison of real growth experienced by oil shock episodes

Figure 5. Comparison of CPI inflation experienced by oil shock episodes

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

April 2002-March 2004 March 1990-March 1993

April 1980-Jan 1983

April 1978-March 1980

Taylors Business Review, Vol. 4 Issue 1, February 2014

April 1973-Feb 1975

Amir Ranjbar and Saeed Pahlevan Sharif

Taylors Business Review, Vol. 4 Issue 1, February 2014

The Effect of Exogenous Oil Supply Shocks on Major ASEAN Countries

Taylors Business Review, Vol. 4 Issue 1, February 2014

Amir Ranjbar and Saeed Pahlevan Sharif