Do the time-varying effects of oil prices affect the trade balances of ASEAN-5 countries?

This study investigates the effects of oil price shocks on five Association of Southeast Asian Nations (ASEAN-5) trade balances by employing a time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR). The time-varying responses derived from this model indicate that the impacts of oil price shocks vary significantly across economies due to their distinct characteristics in the oil market. The results also demonstrate the significant time-varying impact of economic activity and the real exchange rate on the trade balances of the five countries. The time-varying responses show that the effects of oil prices on trade balances are more pronounced during global and local economic events. Our findings have important policy implications for each country to avoid the risks associated with fluctuations in oil prices. © 2022 Taylor & Francis Group, LLC.