Asymmetric Oil Price Shocks and Macroeconomic Dynamics in ASEAN-5: A Panel VAR Approach

Abstract

This study examines the asymmetric effects of oil price shocks on key macroeconomic variables in the ASEAN-5 economies using an unrestricted panel Vector Autoregressive (VAR) model. Building on Aziz and Dahalan (2015), the analysis employs both linear measures (DLOGROIL) and nonlinear indicators—Net Oil Price Increase (NOPI), Scaled Oil Price Increase (SOPI), Scaled Oil Price Decrease (SOPD), and Mork’s directional measures—to assess their impact on GDP, consumer prices, exports, and imports. The impulse response functions reveal that positive oil shocks tend to generate short-term output gains and persistent inflationary pressures, whereas negative shocks produce weaker and non-symmetric effects, particularly in trade and output. Among the variables, inflation responds most consistently and strongly, highlighting its role as the main transmission channel. Variance decomposition analysis further shows that nonlinear oil shocks account for up to 6.7% of the variation in CPI. These findings suggest that oil price volatility remains a key external factor for macroeconomic management in the ASEAN-5, with inflation risks outweighing output concerns in the short run.