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Author: Claudio Morana
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In this paper the oil price-macroeconomy relationship is investigated from a global perspective, by means of a large scale macro-financial-econometric model. In addition to real activity, fiscal and monetary policy responses and labor and financial markets are considered as well. We find that oil market shocks would have contributed to slowing down economic growth since the first Persian Gulf War episode. Among oil market shocks, supply side disturbances were the largest contributor to macro-financial fluctuations, accounting for up to 12% of real activity variance. The latter shocks would have exercised recessionary effects during the first and second Persian Gulf War and 2008 oil price episodes; preferences, speculative and volatility shocks would have also contributed to exacerbate the recessionary episodes. As long as oil supply will keep expanding at a lower pace than required by demand conditions, a recessionary bias, determined by higher and more uncertain real oil prices, may then be expected to persist also in the near future.
Author: Claudio Morana
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In this paper the oil price-macroeconomy relationship is investigated from a global perspective, by means of a large scale macro-financial-econometric model. In addition to real activity, fiscal and monetary policy responses and labor and financial markets are considered as well. We find that oil market shocks would have contributed to slowing down economic growth since the first Persian Gulf War episode. Among oil market shocks, supply side disturbances were the largest contributor to macro-financial fluctuations, accounting for up to 12% of real activity variance. The latter shocks would have exercised recessionary effects during the first and second Persian Gulf War and 2008 oil price episodes; preferences, speculative and volatility shocks would have also contributed to exacerbate the recessionary episodes. As long as oil supply will keep expanding at a lower pace than required by demand conditions, a recessionary bias, determined by higher and more uncertain real oil prices, may then be expected to persist also in the near future.
Author: Romita Mukherjee
Publisher:
ISBN:
Category :
Languages : en
Pages : 464
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Book Description
A large volume of research has acknowledged the role of oil price shocks to generate a significant stagflationary impact on U.S. and other oil importing nations. Recent research however shows a paradigm shift in this oil price-macroeconomy relationship since the mid 1980s, during which the U.S. economy has been relatively resilient to oil shocks. Both output contraction and inflationary expectations have been milder in the post mid 1980s than before. But the 2007-08 oil shock episode has re-emphasized the immense impact of the ebbs and flows of oil prices on the U.S. economys ups and downs. Global oil price peaked at $148 a barrel in June 2008. With the mortgage crisis and credit crunch, oil was another blow too many. The U.S. economy swamped into one of the greatest recessions of all times. According to Hamilton (2009), the 2007-08 oil shock had a significant contribution to the recent recession. While a lot of work have been done on the effects of oil price shocks on the U.S. economy, relatively little work has investigated what triggers oil price increase. My research illustrates why it is important to study the cause of an oil price rise. First, the effects of oil price rise on the macro variables depend heavily on what causes the shock. Secondly, whereas the oil price hikes of the 1970s and early 1980s can mostly be attributed to exogenous events in OPEC (Arab Oil Embargo, Iran-Iraq War, Iranian Revolution), a significant source of oil price spikes in the post mid 1980 era have been an increase in global oil demand confronting stagnating oil production. From a policy perspective, of course, policies aimed at dealing with higher oil prices must take careful account of what causes oil prices to rise. Empirical research that demonstrates the resilience of U.S. economy to oil price shocks builds on the implicit assumption that as oil price varies, everything else in the global economy is held constant. Thus all variations in oil prices are taken as alike and exogenous. This overlooks the possibility that oil price rise sparked off by diverse events can potentially lead to different repercussions. This thesis is an attempt to develop framework to study the endogenous increase in oil price. The oil price increase arises from increase in U.S. growth rate, increase in foreign growth rate and a purely exogenous oil supply shock by OPEC. The most important result is that the source of oil price rise has changed after the mid 1980s - whereas before the mid 1980s, bulk of the variation in oil price was due to supply shocks by OPEC, post mid 1980s, most of the variation in oil price is explained by increase in U.S. and foreign growth. Furthermore, if the origin of the oil price rise is the same, then the responses of most U.S. macroeconomic variables display remarkable similarity in the pre and post mid 1980s. This result gives us a new way to look at the resilience of the U.S. economic activity to oil price rise since the mid 1980s. The resilience can be explained to a significant extent by the fact that the type of shocks resulting in oil price rise has changed.
Author: Jordi Galí
Publisher: University of Chicago Press
ISBN: 0226278875
Category : Business & Economics
Languages : en
Pages : 663
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United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.
Author: Yifei Lyu
Publisher:
ISBN:
Category :
Languages : en
Pages : 97
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Book Description
In my dissertation, I use cutting-edge time series econometric models to explore how the effects of government spending shocks change with the state of the economy, how to identify the effects of oil price changes induced by different reasons, and why oil price shocks seem to be much less important nowadays than decades ago. Chapter 1 builds a Markov-switching structural VAR to estimate state-dependent government spending multipliers in the U.S. We show that the multipliers are statistically larger during recessions than during expansions, although smaller than 1 in both periods. Our model has two features. First, we combine quantitative data and qualitative indicators to infer the regimes of the economy across which the multipliers differ. Second, we propose a recursive method to estimate impulse response functions that allows the economy to switch regimes after the shock. We argue that these two features are important for reconciling the main findings in previous studies. Chapter 2 estimates a standard structural VAR of the global oil market using both external and internal instrumental variables. I find that a negative oil supply shock leads to a delayed but significant decline in economic activity. Whereas oil consumption demand shocks do not have a significant effect on economic activity, a positive shock to oil inventory demand results in significant declines in oil production and economic activity at the same time. Furthermore, I show that oil price movements are mostly driven by shocks to oil consumption demand. Chapter 3 revisits the evidence in Blanchard and Gali (2010) that the effects of oil price shocks have diminished since the mid-1980s. I show that the apparent instability in the oil price-macroeconomy relationship they find can be accounted for by the endogeneity of oil price changes and the lower energy share in consumption in recent decades. When these two factors are taken into account, the effects of oil price shocks on real economic activity appear to be stable over time. Nevertheless, the impact of oil prices on inflation has noticeably weakened over time.
Author: Mark A. Hooker
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 48
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Author: James D. Hamilton
Publisher:
ISBN:
Category : Petroleum products
Languages : en
Pages : 6
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Author: Mark A. Hooker
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 36
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Author: Mark Hooker
Publisher:
ISBN:
Category : Petroleum products
Languages : en
Pages : 18
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Author: Apostolos Serletis
Publisher:
ISBN:
Category :
Languages : en
Pages : 14
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Book Description
We use the longest span data that have ever been studied before (from 1870 to 2014) to investigate the relationship between the price of oil and the level of economic activity in the United States. In the context of a bivariate (identified) structural GARCH-in-Mean VAR in real output growth and the change in the real price of oil, we find that uncertainty about oil prices has had a negative and significant effect on real output. We also find that the responses of real output growth to positive and negative shocks are not very informative of whether they are symmetric or asymmetric, and that accounting for oil price uncertainty tends to amplify the negative dynamic response of real output growth to unfavorable (positive) oil price shocks.
Author: Michael D. Bordo
Publisher: University of Chicago Press
ISBN: 0226066959
Category : Business & Economics
Languages : en
Pages : 545
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Book Description
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
