Effect of oil and food price shocks on the Ecuadorian economy
Measuring the response on economic growth and domestic inflation due to fluctuations on oil prices in the international market is a matter of interest for oil exporting economies, as is the case of Ecuador. A more precise understanding of the dynamics of these relationships is an essential condition...
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| Format: | article |
| Language: | spa |
| Published: |
2020
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| Subjects: | |
| Online Access: | https://estudioseconomicos.bce.fin.ec/index.php/RevistaCE/article/view/263 |
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Add Tag | Summary: | Measuring the response on economic growth and domestic inflation due to fluctuations on oil prices in the international market is a matter of interest for oil exporting economies, as is the case of Ecuador. A more precise understanding of the dynamics of these relationships is an essential condition for the development of short-term action plans and medium- and long-term economic development strategies. This research aims to analyze the short-term impact on macroeconomic variables in Ecuador, economic growth and inflation specifically, due to shocks in two exogenous variables: world oil price and the world food price index, in the period 1980-2019. For this, a structural VAR model is used and impulse response functions and variance decomposition are analyzed. The results allow to conclude that oil price shocks positively affect Ecuador's economic growth for two consecutive years, while inflation is negatively affected in the initial period by shocks in the food index and oil prices. The forecast error variance is mostly affected by the food index in initial periods, and by oil price shocks in subsequent forecast periods |
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