Trade linkages and transmission of oil price fluctuations

Farhad Taghi Zadeh Hesary, Naoyuki Yoshino, E. Rasoulinezhad*, Youngho Chang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

46 Citations (Scopus)


This study is an attempt to ascertain how oil price shock can affect a trade-linked system via monetary variables. To this end, a simultaneous equation model (SEM) was applied through a Weighted Two Stage Least Squares (W2SLS) estimation method to different countries (21 cases) with business relations over the period from Q1 2000 to Q4 2015. In the case of oil-exporting countries—consisting of Iran, Russian Federation, UAE, Indonesia, and Kazakhstan—the findings revealed that they totally benefit from oil price increases. In the case of oil-importing countries, the effects are more diverse. To derive a better interpretation, we divided them into four groups: European Union (EU) members (Germany, Italy, the Netherlands, and Poland); East Asian nations (Japan; People's Republic of China; Republic of Korea; Viet Nam; Taipei China; Singapore; and Hong Kong, China); Commonwealth of Independent States (CIS) (Ukraine and Belarus) and others (the United States, India, and Turkey). The results showed that all these countries importing oil face a negative supply shock, except Turkey which benefits directly from an oil price shock. Furthermore, the indirect effect coefficient received through trade for all these countries was positive.

Original languageEnglish
Article number110872
JournalEnergy Policy
Publication statusPublished - 2019 Oct 1


  • Crude oil price
  • Direct and indirect effect of oil shocks
  • Trade linkage

ASJC Scopus subject areas

  • Energy(all)
  • Management, Monitoring, Policy and Law


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