The economic effects of oil price changes on Philippine manufacturing
Date
2009-10
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Abstract
This paper aims to determine the relationship be1;ween changes in domestic oil prices and Philippine manufacturing performance. Two sets of V AR models are employed using linear and non-linear oil price specifications using several economic variables. From the linear oil price specification VAR model, the impulse response function reveals that oil price movement causes positive effects in the output of the manufacturing sector. The variance decomposition shows that oil prices are quite important as a cause of the variance in the production of the manufacturing sector. From the asymmetric specification, it has been found that positive oil price changes determine a consistent contraction in manufacturing output. On the other hand, negative oil price changes show that manufacturing output does not increase so much despite a decrease in oil prices. Moreover, variance decomposition shows that contribution of oil price decreases on production variation is greater than oil price increases.
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Keywords
Economic effect, Oil price, Pricing, Oil, Manufacturing industry