A Monetary Explanation of Oil and Gold Prices During Postwar Stagflation and Recovery: 1957-1999

Central European University Working Paper No. 5/2000

Posted: 23 Jan 2001

See all articles by Max Gillman

Max Gillman

Central European University (CEU) - Department of Economics

Anton Nakov

CEPR; European Central Bank (ECB)

Date Written: 2000

Abstract

This paper studies the effect of the inflation on oil and gold prices in the post-war period. It presents a monetary explanation of oil and gold pricing through a cash-in-advance economy. It tests the hypothesis that the oil and gold price rises, including those during the "oil shocks" in 1974 and 1979, were a consequence rather than a cause of accelerating inflation in the developed industrial world. Granger casuality and cointegration evidence support the model's prediction that the oil and gold price behavior can be explained by money supply changes. The evidence includes support for an asset price relation derived from the model that formalizes the monetary explanation.

Keywords: oil, gold, inflation, cointegration, cash-in-advance

JEL Classification: E31, E51, E13, Q43

Suggested Citation

Gillman, Max and Nakov, Anton A., A Monetary Explanation of Oil and Gold Prices During Postwar Stagflation and Recovery: 1957-1999 (2000). Central European University Working Paper No. 5/2000, Available at SSRN: https://ssrn.com/abstract=253318

Max Gillman (Contact Author)

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
+36 1 327 3227 (Phone)
+36 1 327 3232 (Fax)

Anton A. Nakov

CEPR ( email )

London
United Kingdom

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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