Determining the functional form of relationships between oil prices and macroeconomic variables: The case of Mexico, Indonesia, South Korea, Turkey countries

Abstract

The aim of this study is to investigate that how economic conditions change when crude oil shocks occured in 1980-2013 for Mexico, Indonesia, South Korea, Turkey (MIST) countries. Another objective of the study is to determine accurately the functional forms of the relationships between oil prices and macroeconomic variables. For this aim, the relationships between crude oil price and macroeconomic variables were estimated by using additive model being a non-parametric model. In order to make comparisons, estimation results of the ordinary least squares model being parametric were also given. The F-test statistics showed that relationships between crude oil price and macroeconomic variables were explained by non-parametric models better than parametric models. Teraesvirta et al. Neural Network test (1993) shows also that oil price shocks can cause to be symmetric effects on macroeconomic variables while asymmetric effects on some macroeconomic variables. © 2016, Econjournals. All rights reserved.