Financial crisis, oil shock and trade in Asia

Abstract

Purpose

In this paper the authors address the questions whether global financial crises cause oil shocks worldwide, then whether such shocks affect trade flows of both oil importing and oil exporting countries of East-West Asia. The purpose of this paper is thus to explore such effects by specifying basically a dynamic export model using data of the Asian economies countries over the period 1980-2008.

Design/methodology/approach

An ARDL specification is applied to show the dynamic effects of main determinants, including financial crisis and the world oil price, on the export flows of each country in the sample. The data for financial crisis have been compiled by Hatzius et al. (2010).

Findings

The results, as a whole, imply that both financial crisis and oil price have a cross-effects on Asian trade flows in the short run, while this effects could not occur in the long run.

Originality/value

The goal is to estimate an econometric model of exports to examine how recent crises affect export flows in the selected Asian countries. Different from previous studies in the literature, this paper first explores the interaction between financial crisis and oil shocks and second uses an extended and dynamic export model, based on ARDL approach. The core of the study relies on the question whether a cross-relationship between oil price and financial crisis affects the export flows of the Asian countries: China, Japan, Iran, Malaysia, Saudi Arabia, South Korea and Turkey which are both oil importing and exporting.

Citation

Komail Tayebi, S. and Yazdani, M. (2014), "Financial crisis, oil shock and trade in Asia", Journal of Economic Studies, Vol. 41 No. 4, pp. 601-614. https://doi.org/10.1108/JES-04-2011-0053