This paper extends the examination on the oil effect on the global economy using the data decomposition approach of Kilian [1] that distinguishes oil sources into three components. In order to capture the asymmetric effects of three oil sources on the world commodity price inflation, the panel threshold regression of Hansen [2] is applied. In addition, this paper also compares the influence of three oil sources with that of oil price changes. The results capture the threshold effects of oil price changes and oil components, indicating that oil effect is nonlinear/ asymmetric. The change in spot oil price is the main cause to higher commodity price inflation. Oil price changes may trigger commodity price changes/ inflation which may pass-through into higher production cost and consumer price. The three oil components only show limited effect on the global commodity price inflation.
Volume 11 | 12-Special Issue
Pages: 9-15