The Impact of International Oil Prices on Industrial Production: The Case of Thailand
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Abstract
This paper analyzes the impact of international oil prices on Thailand’s industrial production
using Johansen cointegration test. The results show that U.S. dollar real exchange rate does
not affect the economy’s industrial production index, while oil prices, and real money supply
significantly impose a positive impact on the index. The positive relationship between
industrial production index and oil prices indicates that the manufacturing sector can adjust
itself to higher costs of production in the long run. In the short run, industrial production are
affected by real money supply, real exchange rate and international oil prices. However, any
deviation from a stationary long-run equilibrium in the short run will be corrected in a short
period of time.
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