The Oil Price-Macroeconomy Relationship Since the Mid-1980s: A Global Perspective
Università di Milano Bicocca; Università degli Studi di Milano-Bicocca - Department of Economics, Quantitative Methods and Business Strategies (DEMS); Center for Economic Research on Pensions and Welfare Policies (CeRP)
August 28, 2012
Energy Journal, 2013, 34, 153-189
We investigate the oil price-macroeconomy relationship from a global perspective, by means of a large scale macro-financial-econometric model. In addition to real activity, we consider fiscal and monetary policy responses and labor and financial markets conditions, in order to provide a comprehensive account of the macro-financial effects of oil price shocks. We find that oil market supply side, speculative, preferences, and volatility shocks exercised recessionary effects during the first and second Persian Gulf War and 2008 oil price episodes. As long as oil supply will keep expanding at a slower pace than required by demand conditions, and in so far as the recently passed regulatory provisions aimed at controlling financial speculation in the oil (and other commodities) futures market will prove unsuccessful, a recessionary bias, determined by higher and more uncertain real oil prices, may then be expected to persist also in the near future.
Keywords: oil price, oil price-macroeconomy relationship, macro-finance interface, international business cycle, factor vector autoregressive models
JEL Classification: C22, E32, G12Accepted Paper Series
Date posted: April 18, 2012 ; Last revised: July 28, 2013
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