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Oil Price Shock To Economic of Thailand
Oil Price Shock To Economic of Thailand
Resources Policy
journal homepage: www.elsevier.com/locate/resourpol
a r t i c l e in fo
abstract
Article history:
Received 15 April 2008
Received in revised form
4 September 2008
Accepted 11 September 2008
This paper empirically examines the impact of oil price volatility on key macroeconomic indicators of
Thailand. Following Andersen et al. [2004. Analytical evaluation of volatility forecasts. International
Economic Review 45(4), 10791110], quarterly oil price volatility is measured by using the realized
volatility (RV). The impact of the oil price volatility is investigated using the vector auto-regression
(VAR) system. The Granger causality test, impulse response functions, and variance decomposition
show that oil price volatility has signicant impact on macroeconomic indicators, such as
unemployment and investment, over the period from 1993Q1 to 2006Q4. Perrons [1997. Further
evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics 80(2),
355385] test identies structural breaks in all the concerned variables during the time of the Asian
Financial Crisis (19971998). A VAR for the post-crisis period shows that the impact of oil price volatility
is transmitted to budget decit. The oating exchange rate regime introduced after the crisis may be the
key contributor to this new channel of impact.
Crown Copyright & 2008 Published by Elsevier Ltd. All rights reserved.
JEL Classicaton:
C32
Q43
O13
Keywords:
Oil price volatility
Thailand
Granger causality test
Impulse response function
Variance decomposition
Introduction
Oil, like other primary commodities, is a vital input in the
production process of an economy. Primary commodity prices
affect aggregate price levels positively as commodities are used as
raw materials in industrial production (Bloch et al., 2006).
Similarly, oil is needed to generate electricity, run production
machinery, and transport the output to the market. Further,
volatility in oil prices may reduce aggregate output temporarily as
it delays business investment by raising uncertainty or by
inducing expensive sectoral resource reallocation (Guo and
Kliesen, 2005). Although industrialized developed countries seem
to be more dependent on oil, evidence shows that the demand for
oil in developing countries is on an increasing trend (Birol, 2007).
Most of the earlier studies concerning oil price shocks or
volatility and economic activities have been conducted in the
context of developed economies; for example Hamilton (1983),
Burbridge and Harrison (1984), Gisser and Goodwin (1986), Mory
(1993), Mork and Olsen (1994), and Ferderer (1996), among
others. Research concerning the impact of oil price volatility in the
0301-4207/$ - see front matter Crown Copyright & 2008 Published by Elsevier Ltd. All rights reserved.
doi:10.1016/j.resourpol.2008.09.001
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122
incorporate oil price in their model. While the rst approach takes
oil prices at their levels, the second approach employs different
volatility measures to capture the oil price uncertainty.
In response to two consecutive oil shocks in the early and late
1970s, a considerable number of studies have examined the
impact of shocks to oil price levels on economic activities.
Pioneering work by Hamilton in the early 1980s on the relationship between oil price and economic activities spurred researchers to look into the issue in greater detail. Hamilton (1983)
analyzes the behavior of oil price and the output of the US
economy over the period 19481981, and concludes that every US
recession between the end of World War II and 1973 (except the
19601961 recession) has been preceded, with a lag of around
three-fourths of a year, by a dramatic increase in the price of crude
petroleum. He further notes that post-1972 recessions in the US
were mainly caused by OPECs supply-oriented approach. In his
subsequent works, Hamilton (1988, 1996) strengthens his conviction that there is an important correlation between oil shocks and
recession. In a recent survey, Hamilton (2008) further stresses the
importance of oil price on macroeconomic activities.
Since then a number of researchers have supported and
extended Hamiltons results. Mork (1989) examines the relation
between oil price change and GNP growth in the US with an
extended data set (19481988) to capture the effect of both
upward and downward movements of oil price on output.
Hamilton considers only large upward price movements and nds
that there is a signicant negative correlation between oil price
and output. The major contribution of Morks study is that it nds
an asymmetric impact of oil prices on economic activities.
Burbridge and Harrison (1984), using somewhat different methods and OECD data, nd mixed but overall reinforcing evidence of
impact based on analysis of the US, Japan, Germany, the UK, and
Canada. They nd that oil price increases have a sizeable negative
impact on industrial production in the US and the UK, but the
responses in other countries are small. This study also nds
negative relationships between the oil price shock and macroeconomic indicators by using a comprehensive empirical model.
Gisser and Goodwin (1986) work on the US economy covering
the period 1961Q11982Q4. They employ a reduced-form
approach to assess the quantitative signicance of the impact of
crude oil prices on the US economy. They nd that crude oil prices
have a signicant impact on output, even exceeding the impacts of
monetary and scal policies. Mork and Olsen (1994) examine the
correlation between oil price and GDP in seven OECD countries
(the USA, Canada, Japan, West Germany, France, the UK, and
Norway) over the period of 1967Q31992Q4. They nd a
signicant negative correlation between oil price increases and
GDP in most of the countries studied. They estimate bi-variate
correlations as well as partial correlations within a reduced-form
macroeconomic model. The correlations between oil price
increases and GDP are found to be negative and signicant for
most of the countries, but positive for Norway, whose oilproducing sector is large relative to the economy as a whole.
The correlations with oil price decreases are mostly positive, but
signicant only for the USA and Canada.
Cunado and Gracia (2005) examine the impact of oil price
shocks on economic activities and ination in six Asian countries,
namely Japan, Singapore, South Korea, Malaysia, Thailand, and the
Philippines. Using quarterly data from 1975Q1 to 2000Q2 they
nd that oil prices have a signicant impact on both economic
growth and ination, and this result is more signicant when oil
price is measured in local currencies. They also nd evidence of
the asymmetric effect of oil prices on economic activities in their
study. Although the paper is a brilliant attempt to study Asian
economies, which are not given that much attention in previous
works in this eld, it could have considered other indicators of
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S. Raq et al. / Resources Policy 34 (2009) 121132
123
Guo and Kliesen (2005) look into the impact of oil price
volatility on the US economy. Using the measure of realized
volatility constructed from daily crude oil future prices traded on
the NYMEX, they nd that, over the period 19842004, oil price
volatility has a signicant effect on various key US macroeconomic indicators, such as xed investment, consumption, employment, and the unemployment rate. The ndings suggest that
changes in oil prices are less signicant than the uncertainty
about future prices. They also nd that standard macroeconomic
variables do not forecast realized oil price volatility, which
indicates that the variance of future oil prices reect stochastic
disturbances. They conclude that this is mainly driven by
exogenous events, like signicant terrorist attacks and military
conicts in the Middle East.
Some observations can be made from the above discussion.
Firstly, oil price shocks have important impact on aggregate
macroeconomic indicators, such as GDP, interest rates, investment, ination, unemployment and exchange rates. Secondly, the
impact of oil price changes on the economy is asymmetric; that is,
the negative impact of oil price increases is larger than the
positive impact of oil price decreases. There have been few
academic endeavors made to analyze the impact of oil price
volatility per se on economic activities and, more importantly,
such studies are conducted almost exclusively in the context of
developed countries, especially the USA.
Studies analyzing the impact of oil price volatility are
now needed for developing countries. In the face of global
competition, maintaining economic stability has become the
crucial task for policy makers in these countries. Moreover,
the economies of developing countries are fundamentally
different from those of developed countries. Developing countries
are generally characterized by relatively high unemployment,
less-developed nancial markets, weak infrastructure, etc.
Moreover, the dependence of developing countries on oil is
forecasted to be increasing over the next couple of decades. Thus,
it is of utmost importance to identify what impact oil price
volatility has on the economic activities of these countries. As no
known studies have examined this aspect in the context of
developing countries, this remains an untapped area of serious
research. This study intends to make some contribution to an
understanding of the issue of oil price volatility and its impact
on the real economic activities of one of these developing
countries, Thailand.
ARTICLE IN PRESS
124
Methodology
This article employs the Granger causality test to examine the
causal relationship between oil price volatility and other leading
economic indicators of Thailand. Causality in Grangers (1969)
sense is inferred when values of a variable, say, Xt has explanatory
power in a regression of Yt on lagged values of Yt and Xt. If lagged
values of Xt have no explanatory power for any of the other
variables in the system, then Yt is viewed as weakly exogenous to
the system.
Vector auto-regression (VAR) of the following form is considered for this purpose:
Y t a0
n
X
bi Y ti
n
X
i1
RV t h
1=h
X
r h2
t1ih
i1
where the h-period return (in this study this is daily oil price
return) is given by rh
t logSt logSth and 1/h is a positive
integer. In accordance with the theory of quadratic variation, the
realized volatility RVt(h) converges uniformly in probability to IVt
as h-0, as such allowing for ever more accurate non-parametric
measurements of integrated volatility. Furthermore, papers of
Zhang et al. (2005) and At-Sahalia et al. (2005) state that the
realized variance is a consistent and asymptotically normal
estimator once suitable scaling is performed. The estimated
realized volatility and all macro-variables used in this study are
graphically represented below. These gures reveal two important
facts; (i) crude oil price has been highly volatile in recent years,
particularly in the second half of 1990s and (ii) all the data series
portray spikes around the period of the Asian Financial Crisis of
19971998.
X t f0
n
X
i1
li X ti mt
(1)
i1
ji Y ti
n
X
Zi X ti nt
(2)
i1
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125
0.14
10.0
0.12
7.5
Investment (INV)
1.8
1.6
5.0
0.10
1.4
2.5
0.08
1.2
0.0
0.06
-2.5
0.04
1.0
-5.0
0.02
0.8
-7.5
-10.0
0.00
1994
1996
1998
2000
2002
2004
2006
0.6
1994
1996
1998
2000
2002
2004
1994
2006
1996
Inflation (INF)
2002
2004
2006
14
2.5
4
2000
3.0
1998
12
2.0
10
1.5
1.0
2
0.5
0.0
-0.5
0
-1.0
1994
1996
1998
2000
2002
2004
1994
2006
1996
1998
2000
2002
2004
2006
2004
2006
1994
1996
1998
2000
2002
2004
2006
10
5
0
0
-4
-5
-8
-10
-15
-12
1994
1996
1998
2000
2002
2004
2006
1994
1996
1998
2000
2002
k
X
ai Dyti et
(3)
1;
0;
(
if t4T b
t Tb
DT t
otherwise
0;
(
1; if t T b 1
DT b
0; otherwise
if t4T b
otherwise
ARTICLE IN PRESS
126
Table 1
Perron innovational outlier model with change in both intercept and slope
Series
Tb
k1
t b^
t y^
t g^
t d^
a^
ta
Inference
RV
GGDP
INV
UR
INF
IR
TB
BD
DBD
19
20
17
19
21
22
17
20
18
1997Q4
1998Q1
1997Q2
1997Q4
1998Q2
1998Q3
1997Q2
1998Q1
1997Q3
0
5
0
1
1
0
8
7
1
1.45
4.98
0.79
1.59
2.38
4.48
0.93
2.69
1.85
3.26
3.55
6.80
6.35
3.14
7.56
3.67
4.07
1.68
2.43
4.73
2.02
1.23
0.77
1.89
1.51
3.29
2.06
6.14
5.46
4.96
2.56
1.74
6.76
3.01
1.92
1.42
0.183
0.48
0.54
0.09
0.18
0.58
0.01
1.06
1.07
7.56
5.39
6.65
7.78
6.90
8.79
6.031
4.35
14.55
S
S
S
S
S
S
S
NS
S
Note: 1%, 5%, and 10% critical values are 6.32, 5.59, and 5.29, respectively (Perron, 1997). The optimal lag length is determined by AIC with kmax 8. S and NS stand for
stationary and non-stationary, respectively.
Analysis of ndings
Time-series properties of data
The tests for unit root are applied to both the original series
and to the rst differences.1 Findings of ADF and PP tests differ in
their results, while KPSS reveals that all the variables are
stationary at their levels. However, since these conventional unit
1
root tests may suffer from low power the study further employs
two other tests, namely NgPerron and DickeyFuller GLS (ERS)
tests. The results for these tests also conrm that most of the
variables are stationary at their levels. Nevertheless, the signicant part of all these tests is that they all indicate that realized
volatility (RV) is I (0).
However, as mentioned earlier, the traditional unit root test
cannot be relied upon if the underlying series contains structural
break(s). This study uses Perrons (1997) unit root test, which
allows for a structural break and the test results are summarized
in Table 1. The test results provide a very interesting fact that for
all the variables the dates for structural break are around the
Asian Financial Crisis of 19971998. Thus, the study employs
multiple VAR systems: rstly, a VAR analysis for the whole sample
and, secondly, a VAR analysis for the data period after a date
beyond the structural breaks, i.e. from 1999Q1 to 2006Q4.
The Perron (1997) test results provide evidence of the
existence of unit root in the budget decit when breaks are
allowed. However, when the series is differenced once, the
variable becomes stationary. Thus, it can be concluded that the
underlying data is non-stationary at level but stationary at its rst
difference. However, the volatility of oil prices is stationary at
level. Since there is one non-stationary variable at level the error
correction model cannot be implemented in this regard. Hence,
the impact analysis needs to be performed in the VAR system
where the only non-stationary variable i.e. budget decit, is rst
differenced before putting it into the model. Now the concern is
whether an unrestricted VAR or a restricted one (to be more
specic VARX) is appropriate for this particular study.
Model selection
A number of tests are performed to identify the appropriate
model for investigating the relationship among the variables under
consideration. In selecting the correct form of the model, the rst
step is to perform the VAR Granger causality/block exogeneity
Wald Test. This test investigates whether an endogenous variable
can be treated as exogenous. The result of the exogeniety test for
realized volatility is presented in Table 2. The statistic in the last
row (all) is the w2 statistic for joint signicance of all other lagged
endogenous variables in the equation, and the table reveals that, in
respect of all other variables, realized volatility of oil prices can be
treated as an endogenous variable in the model.
Moreover, the same test can be employed to identify whether
volatility in oil prices Granger causes other variables in the
system. The results of the exogeneity test for the other variables
are given in Table 3. The VAR Granger causality test indicates
that GDP growth, investment, unemployment, and ination are
Granger caused by oil price volatility.
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S. Raq et al. / Resources Policy 34 (2009) 121132
Table 2
Test of endogeniety for RV
Excluded variable
w2
D.F.
Probability
GGDP
INV
UR
INF
IR
TB
DBD
All
0.000340
2.216266
2.186352
1.227465
3.698375
3.712326
0.006277
20.51950
1
1
1
1
1
1
1
0.9853
0.0136
0.0139
0.2679
0.0545
0.0540
0.9368
0.0046
Table 3
Granger causality test
Dependent variable
w2
D.F.
Probability
GGDP
INV
UR
INF
IR
TB
DBD
9.365603
4.831090
15.60052
3.700295
0.455655
0.019409
0.384085
1
1
1
1
1
1
1
0.0022
0.0280
0.0001
0.0544
0.4997
0.8892
0.5354
127
Table 4
VAR (1) output for Thailand
RV
GGDP
INV
UR
INF
IR
TB
100.7969
(32.9366)
0.340719
(0.80765)
13.82964
(3.50140)
12.41577
(6.45440)
4.568806
(6.76838)
3.974950
(28.5316)
DBD
RV(1)
0.016039
(0.15666)
GGDP(1)
1.260000
(0.00068)
0.233898
(0.14325)
0.002400
(0.00351)
0.046667
(0.01523)
0.013307
(0.02807)
0.051741
(0.02944)
0.273436
(0.12409)
0.296684
(0.15442)
INV(1)
0.032923
(0.02212)
8.112659
(4.64947)
0.764016
(0.11401)
0.840708
(0.49427)
0.517018
(0.91113)
8.080000
(0.95545)
5.424502
(4.02764)
7.892113
(5.01213)
UR(1)
0.006491
(0.00439)
1.470879
(0.92298)
0.015807
(0.02263)
0.488116
(0.09812)
0.175170
(0.18087)
0.274910
(0.18967)
0.585587
(0.79953)
1.483793
(0.99497)
INF(1)
0.004181
(0.00377)
0.147161
(0.79335)
0.029002
(0.01945)
0.151961
(0.08434)
0.187564
(0.15547)
0.441827
(0.16303)
1.362374
(0.68725)
2.152068
(0.85523)
IR(1)
0.001620
(0.00084)
0.090718
(0.17710)
0.004775
(0.00434)
0.024487
(0.01883)
0.015629
(0.03471)
0.850663
(0.03639)
0.054799
(0.15342)
0.237514
(0.19092)
TB(1)
0.001501
(0.00078)
0.034675
(0.16377)
0.008827
(0.00402)
0.015312
(0.01741)
0.042119
(0.03209)
0.042678
(0.03365)
0.785600
(0.14187)
0.075512
(0.17654)
DBD(1)
5.540000
(0.00070)
0.555279
(0.14709)
0.004277
(0.00361)
0.021044
(0.01564)
0.037688
(0.02883)
0.064336
(0.03023)
0.046624
(0.12742)
0.051830
(0.15857)
0.071668
(0.03399)
18.15349
(7.14526)
0.404566
(0.17521)
1.686756
(0.75959)
0.074393
(1.40021)
1.014942
(1.46833)
7.802119
(6.18963)
13.83383
(7.70260)
22.00455
(35.5058)
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128
Response of RV to RV
Response of GGDP to RV
0.020
0.015
0.010
0.005
-1
0.000
-2
Response of INV to RV
0.04
0.00
-0.04
-0.08
-3
-0.005
5
10
15
20
25
30
35
40
-0.12
5
Response of UR to RV
10
15
20
25
30
35
40
Response of INF to RV
10
15
20
25
30
35
40
35
40
Response of IR to RV
0.5
0.4
0.8
0.4
0.3
0.3
0.2
0.2
0.1
0.0
0.1
0.0
-0.4
0.0
-0.1
-0.1
-0.2
0.4
-0.8
-0.2
-0.3
5
10
15
20
25
30
35
40
-1.2
5
Response of TB to RV
10
15
20
25
30
35
40
10
15
Response of DBD to RV
1.5
1.0
2
0.5
1
0.0
-0.5
0
-1.0
-1
-1.5
5
10
15
20
25
30
35
40
10
15
20
25
30
35
40
Fig. 2. Responses from RV, GGDP, INVT, UR, INF, IR, TB and DBD to Cholesky One S.D. Innovations+S.E in RV.
20
25
30
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S. Raq et al. / Resources Policy 34 (2009) 121132
129
Table 5
Bivariate variance decomposition of RV with GGDP, INV, UR, INF, IR, DTB, and DBD
Period
S. E.
RV
GGDP
S.E.
RV
INV
S.E.
RV
UR
S.E.
RV
INF
1
10
20
30
40
3.428
4.583
4.602
4.608
4.608
0.318
15.131
15.165
15.183
15.182
99.682
64.230
63.715
63.606
63.594
0.084
0.266
0.281
0.289
0.290
8.269
23.222
22.514
22.389
22.387
91.512
34.498
31.919
31.500
31.289
0.364
0.941
0.987
1.004
1.008
3.472
26.196
25.559
25.335
25.313
85.474
17.374
15.811
15.286
15.157
0.672
0.882
0.922
0.925
0.927
1.887
11.440
12.414
12.411
12.463
74.742
49.466
47.053
46.76536
46.618
Period
S.E.
RV
IR
S.E.
RV
TB
S.E.
RV
DBD
1
10
20
30
40
0.704
2.500
3.491
3.577
3.603
1.619
8.123
14.692
14.943
14.992
86.778
30.293
16.085
15.778
15.624
2.969
6.611
6.766
6.848
6.862
5.178
15.597
15.621
15.731
15.758
82.905
46.778
45.314
45.038
44.938
3.696
4.427
4.428
4.429
4.429
0.917
3.152
3.159
3.162
3.163
46.519
34.972
34.954
34.947
34.945
Note: The decompositions are reported for one-, 10-, 20-, 30 and 40-quarter horizons. Ordering used here is RV, GGDP, INVT, UR, INF, IR, TB, and DBD. However, changing the
order did not alter the results to any substantial degree. This is because the Choleski decomposition is used in order to orthogonalize the innovations across equations.
Table 6
VAR granger causality/block exogeneity wald tests for RV
Excluded variable
w2
D.F.
Probability
GGDP
INV
UR
INF
IR
TB
BD
All
7.878130
0.544623
9.290095
1.514428
0.169897
1.363557
0.256577
20.51950
2
2
2
2
2
2
2
0.0195
0.7616
0.0096
0.4690
0.9186
0.5057
0.8796
0.0195
Table 7
VAR granger causality/block exogeneity Wald tests for other variables
Dependent variable
w2
D.F.
Probability
GGDP
INV
UR
INF
IR
TB
BD
3.702518
5.038456
0.357929
2.367984
1.547978
2.659912
3.989715
2
2
2
2
2
2
2
0.1570
0.0805
0.8361
0.3061
0.4612
0.2645
0.1360
Banking Crisis of Asia. Moreover, for the data period from 1999Q1
to 2006Q4, the SIC indicates that the appropriate lag length of
VAR is 2.
The VAR Granger causality/block exogeneity Wald Test table
indicates that, in respect of all other variables, realized volatility of
oil prices can be treated as an endogenous variable in the model as
is the case for the longer period (Table 6).
The test for Granger causality for all the other variables when
RV is excluded indicates that only investment is Granger caused
by oil price volatility when the data set spans from 1999Q1 to
2006Q4 (Table 7).
The results of the VAR (2) output for the data period
1999Q12006Q4 is presented in Appendix Table A1, and the
impulse response functions are given in Fig. 3. The impulse
responses for the period after the banking crisis (1999Q1
2006Q4) show that, in most of the cases, realized volatility has
its impact on the shorter time horizon and the highest impact
would happen to investment, interest rate, and budget decit.
The results of variance decomposition over a period of a 40quarter time horizon for different variables for the period of
1999Q12006Q4 are presented in Table 8. The results of variance
decomposition show that, oil price volatility explains a fair
portion of innovations in GDP growth, investment, and budget
decit over a longer time period horizon.
auto-regressive (VAR) framework taking the data set for all the
concerned variables spanning from 1999Q1 (just after the last
quarter of structural break, i.e. 1998Q3) to 2006Q4. The test
of time-series properties and model estimation results are as
follows.
ARTICLE IN PRESS
130
Response of RV to RV
Response of GGDP to RV
0.02
Response of INV to RV
0.6
0.4
0.01
0.2
0
0.0
0.00
-1
-0.2
-2
-0.01
-0.4
-3
5
10
15
20
25
30
35
40
-0.6
5
Response of UR to RV
10
15
20
25
30
35
40
Response of INF to RV
10
15
20
25
30
35
40
35
40
Response of IR to RV
0.8
2
0.12
0.4
0.08
0.04
0.00
0.0
-0.4
-0.04
-1
-0.08
-2
-0.12
-3
5
10
15
20
25
30
35
40
Response of TB to RV
10
15
20
25
30
35
40
35
40
10
15
20
25
30
Response of BD to RV
0.6
0.4
1
0.2
0
0.0
-0.2
-1
-0.4
-2
-0.6
5
10
15
20
25
30
35
40
10
15
20
25
30
Fig. 3. Responses from RV, GGDP, INVT, UR, INF, IR, TB and DBD to Cholesky One S.D. Innovations+S.E in RV from 1999Q1 to 2006Q4.
Table 8
Bivariate variance decomposition of RV with DGGDP, INV, UR, INF, IR, DTB, and DBD
Period
S.E.
RV
GGDP
S.E.
RV
INV
S.E.
1
10
20
30
40
1.798
4.078
5.073
5.589
5.913
3.827
17.765
16.708
16.211
15.970
96.173
66.125
67.734
68.545
68.095
0.456
0.983
1.051
1.104
1.1545
14.510
6.0234
6.2014
6.3788
6.3248
84.647
21.783
19.617
18.129
17.079
0.206
1.6284
1.801
1.827
1.856
Period
S.E.
RV
IR
S.E.
RV
TB
S.E.
RV
BD
1
10
20
30
40
2.772
4.543
5.207
5.544
5.819
75.221
33.689
27.819
25.529
23.801
1.746
3.505
4.315
5.150
6.049
35.649
22.630
18.211
18.079
17.872
0.409
0.844
1.048
1.303
1.624
7.444
17.375
14.177
10.448
8.287
46.594
14.158
9.371
6.137
4.027
2.831
9.889
8.459
8.254
7.958
0.000
5.424
6.427
6.600
5.954
RV
0.836
1.024
0.889
0.971
0.991
UR
S.E.
RV
INF
65.749
27.713
27.126
27.006
28.437
0.0596
0.17089
0.262
0.3684
0.495
5.192
6.412
4.620
4.127
3.842
51.007
48.013
50.372
51.861
52.849
Note: The decompositions are reported for one-, 10-, 20-, 30- and 40-quarter horizons. Ordering used here is RV, GGDP, INVT, UR, INF, IR, TB, and BD. However, changing the
order did not alter the results to any substantial degree. This is because the Choleski decomposition is used in order to orthogonalize the innovations across equations.
ARTICLE IN PRESS
S. Raq et al. / Resources Policy 34 (2009) 121132
131
Appendix
For VAR (1) output for
1999Q12006Q4 see Table A1.
Thailand
for
the
period
of
Table A1
RV
GGDP
RV(1)
0.176607
(0.26109)
RV(2)
0.570845
(0.35744)
4.517563
(46.1928)
GGDP(1)
0.002041
(0.00177)
0.232980
(0.22849)
GGDP(2)
0.001874
(0.00148)
INV(1)
INV
INF
IR
TB
DBD
1.748280
(3.86086)
0.607179
(1.11819)
39.37850
(52.0271)
43.66341
(32.7704)
14.38598
(7.69104)
2.452231
(5.28554)
2.025462
(1.53080)
59.85878
(71.2254)
31.12911
(44.8629)
3.831760
(10.5291)
0.125123
(0.05794)
0.049746
(0.02614)
0.004445
(0.00757)
0.113808
(0.35232)
0.018680
(0.22191)
0.077189
(0.05208)
0.634877
(0.19083)
0.065793
(0.04839)
0.059071
(0.02184)
0.011536
(0.00632)
0.037956
(0.29424)
0.514596
(0.18534)
0.026430
(0.04350)
0.004188
(0.00828)
0.199843
(1.07019)
0.300970
(0.27137)
0.357581
(0.12246)
0.005581
(0.03547)
0.304139
(1.65015)
1.575878
(1.03938)
0.129416
(0.24394)
INV(2)
0.005463
(0.00876)
1.509865
(1.13189)
0.550350
(0.28701)
0.165882
(0.12952)
0.014027
(0.03751)
0.468762
(1.74528)
1.128605
(1.09931)
0.062441
(0.25800)
UR(1)
0.012968
(0.01315)
1.236178
(1.69912)
0.361000
(0.43084)
0.781499
(0.19442)
0.015431
(0.05631)
0.558082
(2.61990)
0.140399
(1.65020)
0.081181
(0.38729)
UR(2)
0.013883
(0.01146)
1.080146
(1.48098)
0.337705
(0.37553)
0.014773
(0.16946)
0.008116
(0.04908)
1.913536
(2.28354)
0.098160
(1.43834)
0.132217
(0.33757)
INF(1)
0.025648
(0.04418)
4.703893
(5.70943)
0.076855
(1.44773)
0.495949
(0.65329)
0.280802
(0.18921)
11.95022
(8.80346)
2.225445
(5.54505)
1.506360
(1.30139)
INF(2)
0.056236
(0.04629)
1.818193
(5.98183)
0.546661
(1.51680)
1.324780
(0.68446)
0.696311
(0.19823)
4.116152
(9.22347)
2.139267
(5.80961)
0.128571
(1.36348)
IR(1)
0.000138
(0.00132)
0.037615
(0.17113)
0.132176
(0.04339)
0.009829
(0.01958)
0.001258
(0.00567)
0.044974
(0.26386)
0.031565
(0.16620)
0.026240
(0.03901)
IR(2)
0.000630
(0.00160)
0.017428
(0.20660)
0.001401
(0.05239)
0.015473
(0.02364)
0.002622
(0.00685)
0.052030
(0.31856)
0.180121
(0.20065)
0.027026
(0.04709)
TB(1)
0.003541
(0.00304)
0.318590
(0.39324)
0.258664
(0.09971)
0.128737
(0.04500)
0.007185
(0.01303)
0.444279
(0.60634)
0.226425
(0.38192)
0.019350
(0.08963)
TB(2)
0.000833
(0.00285)
0.751676
(0.36869)
0.080683
(0.09349)
0.103622
(0.04219)
0.003647
(0.01222)
0.330218
(0.56849)
0.023471
(0.35807)
0.037011
(0.08404)
BD(1)
0.004656
(0.00931)
0.019620
(1.20259)
0.003840
(0.30494)
0.038453
(0.13760)
0.026735
(0.03985)
0.959234
(1.85429)
0.658712
(1.16797)
0.481852
(0.27412)
BD(2)
0.002426
(0.00832)
0.134277
(1.07473)
0.149265
(0.27252)
0.065791
(0.12297)
0.001447
(0.03562)
0.152756
(1.65715)
0.594786
(1.04379)
0.296999
(0.24497)
0.075894
(0.06187)
8.496136
(7.99610)
1.324581
(2.02756)
1.424487
(0.91494)
0.068964
(0.26499)
2.563754
(7.76589)
3.204182
(1.82261)
63.27385
(33.7418)
1.212755
(8.55586)
UR
26.12685
(11.7130)
16.17972
(12.3293)
ARTICLE IN PRESS
132
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