Abstract
We investigate the role of oil price, oil price volatility and real exchange rate on bilateral trade flow between GCC and Northeast Asia countries for the period 1980–2014 by using the gravity model. Estimated results indicate that traditional variables of gravity model including income, and distance have expected signs. Oil price volatility leads to decrease 4–7% NEA's exports to GCC countries and 1% increase in oil price would leads to reduce 24% Northeast Asia Export to GCC. The elasticity of exports of Northeast Asian economies (NAE)1 to Gulf Cooperation Council (GCC) countries with respect to real exchange rate is ranging from 7 to 14%. Oil consumption in NEA countries has significant positive impact on of GCC's exports to Northeast Asia. The own export income elasticity of NEA countries is lower than the elasticity of export with respect to GCC income, while the own export population elasticity is higher than the elasticity of export with importer population.
•Oil price volatility leads to decrease 4–7% NEA's exports to GCC countries.•1% increase in oil price would lead to reduce 24% Northeast Asia Export to GCC.•Elasticity of NEA's exports with respect to exchange rate is ranging from 7 to 14%.•Oil consumption in NEA has significant positive impact on of GCC's exports.