Global Shocks, Local Ventures: Oil Prices, Dollar Strength, and China's Economic Shifts as Determinants of Entrepreneurial Activity in the Philippines, 2006–2022

Abstract

Global oil price volatility, US dollar strength, and China's ongoing economic transition are commonly assumed to weigh on entrepreneurial activity in trade-exposed emerging economies through rising costs and heightened competition. This paper tests that assumption directly for the Philippines, examining whether these three external forces show a measurable association with the pace of new business formation between 2006 and 2022. Using World Bank and Federal Reserve data, the study estimates a single-country annual time-series model, screening for multicollinearity before testing oil price, dollar strength, and China's export share as simultaneous predictors of Philippine business density and business registrations. A levels-based specification proves inconclusive, substantially confounded by shared secular trends across the shock variables. A first-differenced specification, isolating year-over-year shock variation from trend, tells a clearer story: increases in oil price and dollar strength are each significantly and positively associated with increases in business formation, the reverse of the cost-channel relationship commonly assumed in the literature, while China's export share shows no significant association in any specification tested. These patterns suggest that aggregate net entrepreneurial entry is shaped more by the demand, confidence, and remittance-linked purchasing power that accompany oil and dollar cycles than by the cost pressure these cycles impose on individual firms, even as that firm-level cost pressure remains real. The findings carry different implications at different levels of application: individual founders in cost-exposed sectors should continue to manage oil and currency risk directly, while ecosystem-support institutions should be cautious about reading commodity or currency upswings as aggregate threats to the entrepreneurial pipeline. The analysis is associative rather than causal, limited to a single country and a seventeen-year window bounded by data availability, and should be read accordingly.