The Response of Industrial Production to the Price of Oil : New Evidence for Thailand

This paper examines the oil price-industrial production nexus in Thailand by using multivariate cointegration test. In addition, Granger causality is also used to examine the impact of oil price uncertainty on industrial production growth. The main focus of this paper is on one sector of the economy, i.e., manufacturing sector. Monthly data from 1993 to 2015 are utilized. Empirical results reveal that there is a stable long-run relationship between industrial production and real oil price along with other variables. Industrial production adjusts rapidly to shocks to lending rate, price level and oil price. Furthermore, there exists long-run causality running from lend rate, price level and oil price to industrial production. However, industrial production growth does not respond to oil price shock and oil price uncertainty. Asymmetric and nonlinear relationship between oil price shock and industrial output growth is not found. These findings give policy implications