Oil Shocks in a Global Perspective: Are They Really that Bad?

30 Pages Posted: 16 Aug 2011

See all articles by Tobias Rasmussen

Tobias Rasmussen

International Monetary Fund (IMF)

Agustin Roitman

International Monetary Fund (IMF)

Date Written: August 2011

Abstract

Using a comprehensive global dataset, we outline stylized facts characterizing relationships between crude oil prices and macroeconomic developments across the world. Approaching the data from several angles, we find that the impact of higher oil prices on oil-importing economies is generally small: a 25 percent increase in oil prices typically causes GDP to fall by about half of one percent or less. While cross-country differences in impact are found to depend mainly on the relative size of oil imports, we also show that oil price shocks are not always costly for oil-importing countries: although higher oil prices increase the import bill, there are partly offsetting increases in external receipts. We provide a small open economy model illustrating the main transmission channels of oil shocks, and show how the recycling of petrodollars may mitigate the impact.

Keywords: Cross country analysis, Developing countries, Emerging markets, External shocks, Imports, Oil prices, Price increases

Suggested Citation

Rasmussen, Tobias and Roitman, Agustin, Oil Shocks in a Global Perspective: Are They Really that Bad? (August 2011). IMF Working Papers, Vol. , pp. 1-29, 2011. Available at SSRN: https://ssrn.com/abstract=1910497

Tobias Rasmussen (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Agustin Roitman

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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