Conventional wisdom suggests that oil price increases have a negative effect on
the output of oil-importing countries. This is grounded on the experience of
the United States between the 1940s and the late 1980s, where recessions were
generally preceded by oil price increases. This paper evaluates the impact of oil
price shocks on the Philippines--a developing country and a net oil-importing
economy. Following Kilian's (2008) structural decomposition of real oil price
change, we find indications that the 2008-2009 and 2014-2015 oil price drops
may have lowered the Philippine economy's output growth, potentially due to the
economy's reliance on remittances from abroad and the export market.
