The Differential Effects of Oil Demand and Supply Shocks on the Global Economy

42 Pages Posted: 7 Nov 2012

See all articles by Paul Anthony Cashin

Paul Anthony Cashin

International Monetary Fund (IMF)

Kamiar Mohaddes

University of Cambridge - Judge Business School; University of Cambridge - King's College, Cambridge

Maziar Raissi

affiliation not provided to SSRN

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department

Date Written: October 2012

Abstract

We employ a set of sign restrictions on the generalized impulse responses of a Global VAR-model, estimated for 38 countries/regions over the period 1979-2011Q2, to discriminate - between supply-driven and demand-driven oil-price shocks and to study the time profile of their macroeconomic effects for different countries. The results indicate that the economic-consequences of a supply-driven oil-price shock are very different from those of an oil-demand shock driven by global economic activity, and vary for oil-importing countries compared to energy exporters. While oil importers typically face a long-lived fall in economic activity in response to a supply-driven surge in oil prices, the impact is positive for energy-exporting countries that possess large proven oil/gas reserves. However, in response to an oil-demand disturbance, almost all countries in our sample experience long-run inflationary pressures and a short-run increase in real output.

Keywords: Global VAR (GVAR), interconnectedness, global macroeconomic modeling, impulse responses, international business cycle, oil-demand and oil-supply shocks., oil exporters, exporters, oil prices, exporting countries, oil importers, reer, importing countries, oil-importing countries, commodity exporters, oil exporter, real effective exchange rate, oil exports, exporter, petroleum exporting countries, bilateral trade, aggregate demand, export data, commodity prices, energy exporters, trading partners, oil-exporting countries, trade flows, world economy, capital flows, international trade, open capital accounts, price fluctuations, economic cooperation, trade share, oil export, domestic production,

JEL Classification: C32, E17, F44, F47, Q41

Suggested Citation

Cashin, Paul Anthony and Mohaddes, Kamiar and Raissi, Maziar and Raissi, Mehdi, The Differential Effects of Oil Demand and Supply Shocks on the Global Economy (October 2012). IMF Working Paper No. 12/253, Available at SSRN: https://ssrn.com/abstract=2172192

Paul Anthony Cashin (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Kamiar Mohaddes

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

University of Cambridge - King's College, Cambridge ( email )

King's Parade
Cambridge, CB2 1ST
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

Maziar Raissi

affiliation not provided to SSRN ( email )

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/mehdiraissi/

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