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OIL PRICE VOLATILITY AND THE SINGAPORE MACROECONOMY

WEIWEN NG

Singapore Management University, Singapore

https://doi.org/10.1142/S0217590812500221Cited by:2 (Source: Crossref)

Abstract

We construct a realized volatility measure, using prices of daily West Texas Intermediate (WTI) crude oil futures and illustrate the robustness of this oil price volatility–macroeconomy relationship under a multivariate co-integrated vector autoregressive (VAR) model. Empirical results suggest that a spike in oil price volatility leads to investments and aggregate output to decline and inflation to rise over the period from 1983Q2 to 2009Q2. Furthermore, the gradual decline of Singapore's oil intensity signals a weakening relationship between oil price and the macroeconomy that supports our empirical findings.

An earlier version of this piece was submitted as a senior thesis to Singapore Management University. Since then, major revisions have been made. Opinions expressed in this research do not represent the views of the Ministry of Trade and Industry or the Monetary Authority of Singapore.

Keywords:

JEL: C32, E32, Q43

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