Non-linearities in the dynamics of oil prices |
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| Affiliation: | 1. Department of Mathematics, University of Balochistan, Quetta, Pakistan;2. Department of Mathematics, BUITEMS, Quetta, Pakistan;3. DBS&H, CEME, National University of Sciences and Technology, Islamabad, Pakistan;4. Department of Chemical Engineering, BUITEMS, Quetta, Pakistan;1. Norwegian University of Science and Technology, Department of Neuroscience, Trondheim, Norway;2. St. Olavs Hospital, Department of Neurology and Clinical Neurophysiology, Trondheim, Norway;1. School of Economics and Management, Beijing University of Chemical Technology, Beijing, 100029, China;2. College of Information Science and Technology, Beijing University of Chemical Technology, Beijing, 100029, China;3. School of Economics and Management, North China Electric Power University, Beijing, 102206, China;4. Department of Management Sciences, City University of Hong Kong, Tat Chee Avenue, Kowloon Tong, Kowloon, Hong Kong;1. Department of Occupational Medicine and Public Health, The Faroese Hospital System, Tórshavn, Faroe Islands;2. Center of Health Sciences, Faculty of Health Science and Nursing, University of the Faroe Islands, Tórshavn, Faroe Islands;3. National Hospital of the Faroe Islands, Tórshavn, Faroe Islands;4. Department of Science and Technology, University of the Faroe Islands, Tórshavn, Faroe Islands;5. Institute of Public Health, University of Southern Denmark, Odense, Denmark;6. Department of Environmental Health, Harvard School of Public Health, Boston, MA, United States;1. Department of Chemistry, Faculty of Science, University of Guilan, 41335-1914, Rasht Iran;2. Department of Chemistry, University of Guilan, Campus 2, 41335-1914, Rasht, Iran;3. Institute of Chemistry, Military University of Technology, Kaliskiego 2, 00-908 Warsaw, Poland |
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| Abstract: | Examining stationarity is of particular importance and represents the first step in empirical time-series research. Non-stationarity invalidates many of the results obtained from standard techniques and, therefore, requires special treatment. Because oil prices play an important role in affecting economic variables, this paper examines the stationarity of real oil prices (Brent, Dubai, WTI and the World) over the period 1973:2–2011:2. Real oil prices are expressed in the currencies of seven Asian countries (Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore and Thailand) and in the U.S. dollar. While using linear unit root tests without structural breaks shows no evidence of stationarity, allowing for breaks shows very limited evidence of stationarity. We argue that these results are attributed to the presence of nonlinearities in the behavior of oil prices. Testing for nonlinearity shows significant evidence of nonlinearity in all the cases with evidence of exponential smooth transition autoregression (ESTAR) nonlinearity-type in most cases. Applying unit root tests that account for two types of nonlinearities (smooth transition and nonlinear deterministic trends) reveals evidence of stationarity in all the cases. |
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