Asymmetry and break effects of oil price -macroeconomic fundamentals dynamics: The trade effect channel

This paper seeks to examine the relationship between oil price change and trade components (import, export, and total openness). Essentially, we inquire if countries respond, in the same manner, to oil price changes. To this end, our estimation is based on both symmetric (linear) ARDL and asymmetric (nonlinear) ARDL models. These models also take account of structural breaks using the Bai and Perron (2003) test. The selected countries are China and Germany (high trading), U.S. and India (oil importing) and Russia and Canada (oil exporting). Using a monthly dataset from 01/1992 - 06/2016, the following results were estimated: there is the existence of an asymmetric effect on the export component of the high trading economies (long run), import of the oil importing countries (short run) and import of the oil exporting countries (long run). These results are robust to changes in data frequency and measurement of oil prices. Policy implications were designed based on the obtained information.