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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The impact of oil price on South African GDP growth: a Bayesian Markov switching-VAR analysis
Author:Balcilar, Mehmet
Year:2017
Periodical:African Development Review (ISSN 1467-8268)
Volume:29
Issue:2
Pages:319-336
Language:English
Geographic term:South Africa
Subjects:economic development
petroleum
prices
economic models
Link:http://dx.doi.org/10.1111/1467-8268.12259
Abstract:One characteristic of many macroeconomic and financial time series is their asymmetric behaviour during different phases of a business cycle. Oil price shocks have been amongst those economic variables that have been identified in theoretical and empirical literature to predict phases of business cycles. However, the role of oil price shocks to determine business cycle fluctuations has received less attention in emerging and developing economies. The aim of this study is to investigate the role of oil price shocks in predicting phases of the South African business cycle associated with higher and lower growth regimes. By adopting a regime dependent analysis, we investigate the impact of oil price shocks under two phases of the business cycle, namely high and low growth regimes. As a net importer of oil, South Africa is expected to be vulnerable to oil price shocks irrespective of the phase of the business cycle. Using a Bayesian Markov switching vector autoregressive (MS-VAR) model and data for the period 1960Q2 to 2013Q3, we found the oil price to have predictive content for real output growth under the low growth regime. The results also show the low growth state to be shorter-lived compared to the higher growth state. Bibliogr., notes, ref., sum. [Journal abstract]
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