Exploring the oil price and real GDP nexus for a small island economy, the Fiji Islands
✍ Scribed by Arti Prasad; Paresh Kumar Narayan; Jashwini Narayan
- Publisher
- Elsevier Science
- Year
- 2007
- Tongue
- English
- Weight
- 162 KB
- Volume
- 35
- Category
- Article
- ISSN
- 0301-4215
No coin nor oath required. For personal study only.
✦ Synopsis
The goal of this paper is to examine the relationship between real GDP and oil prices using time series data for the period 1970-2005. Our main finding is that an increase in oil has a positive, albeit inelastic, impact on real GDP, inconsistent with the bulk of the literature. We argue that this is not a surprising result for the Fiji Islands. Our central argument focuses on two aspects of the Fijian economy: (1) the fact that actual output in Fiji has been around 50 per cent less than potential output; thus, Fiji's actual output has not reached a threshold level at which oil prices can negatively impact output; and (2) a rise in oil prices filters through to value added, which in turn is reflected in a larger actual output.