How do daily changes in oil prices affect US monthly industrial output?

Abbas Valadkhani, Russell Smyth

Research output: Contribution to journalArticleResearchpeer-review

5 Citations (Scopus)

Abstract

Detecting asymmetry has become increasingly difficult using single frequency data. This paper goes beyond the prevailing use of aggregate/averaged data in order to provide a more in-depth treatment of the dynamic effects of the price of crude oil on industrial output growth. To do so, we propose an Asymmetric Mixed Data Sampling (AMIDAS) model to examine if there is any concealed evidence of asymmetry arising from daily effects of the price of crude oil on monthly changes in industrial output in the United States (US). We find that this model is able to detect dynamic asymmetric impacts of a high frequency independent variable on a low frequency dependent variable more effectively than when the high frequency variable is aggregated up at the time interval of the low frequency variable. We find that, in comparison with the marginal lagged effects of a rise in the daily price of crude oil, the effects of a fall in the daily price of crude oil are more sluggish as it takes longer for the effects of the oil price drop to die off over time. This finding implies that a fall in the price of crude oil shifts the supply curve rightward less and at a much slower pace than an equivalent price rise shifts it to the left.

Original languageEnglish
Pages (from-to)83-90
Number of pages8
JournalEnergy Economics
Volume67
DOIs
Publication statusPublished - 1 Sep 2017

Keywords

  • Asymmetric effects
  • Crude oil price
  • Industrial production
  • Output growth

Cite this

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title = "How do daily changes in oil prices affect US monthly industrial output?",
abstract = "Detecting asymmetry has become increasingly difficult using single frequency data. This paper goes beyond the prevailing use of aggregate/averaged data in order to provide a more in-depth treatment of the dynamic effects of the price of crude oil on industrial output growth. To do so, we propose an Asymmetric Mixed Data Sampling (AMIDAS) model to examine if there is any concealed evidence of asymmetry arising from daily effects of the price of crude oil on monthly changes in industrial output in the United States (US). We find that this model is able to detect dynamic asymmetric impacts of a high frequency independent variable on a low frequency dependent variable more effectively than when the high frequency variable is aggregated up at the time interval of the low frequency variable. We find that, in comparison with the marginal lagged effects of a rise in the daily price of crude oil, the effects of a fall in the daily price of crude oil are more sluggish as it takes longer for the effects of the oil price drop to die off over time. This finding implies that a fall in the price of crude oil shifts the supply curve rightward less and at a much slower pace than an equivalent price rise shifts it to the left.",
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How do daily changes in oil prices affect US monthly industrial output? / Valadkhani, Abbas; Smyth, Russell.

In: Energy Economics, Vol. 67, 01.09.2017, p. 83-90.

Research output: Contribution to journalArticleResearchpeer-review

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