Is New Zealand's economy vulnerable to world oil market shocks?
Jaforullah, Mohammad; King, Alan
We assess New Zealand’s vulnerability to oil shocks by estimating its price and income elasticities of demand for imported oil and by testing for Granger causality between oil imports, their price and GDP. Based on data for the period 1987Q2–2012Q4, we find the short-run price and income elasticities to be statistically insignificant. However, the long-run price and income elasticity estimates are significant and equal to −0.34 and 1.61, respectively. We also find that oil imports, and to some extent oil prices, Granger-cause real GDP, indicating that the New Zealand economy is vulnerable to shocks in the world oil market.
Publisher: University of Otago
Series number: 1503
ISSN: 1178-2293 (Online)
Keywords: oil imports; price elasticity; income elasticity; Granger causality; cointegration; vector error correction model
Research Type: Discussion Paper
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