Nonlinear Oil Price Dynamics: A Tale of Heterogeneous Speculators?

40 Pages Posted: 8 Jun 2016

See all articles by Stefan Reitz

Stefan Reitz

German Federal Bank - Economics Department

Ulf D. Slopek

Deutsche Bundesbank

Date Written: 2008

Abstract

While some of the recent surge of oil prices can be attributed to robust global demand at a time of tight production capacities, commentators occasionally also blame the impact of speculators for part of the price pressure. We propose an empirical oil market model with heterogeneous speculators. Whereas trend-extrapolating chartists may tend to destabilize the market, fundamentalists exercise a stabilizing effect on the price dynamics. Using monthly data for WTI oil prices, our STR-GARCH estimates indicate that oil price cycles may indeed emerge due to the nonlinear interplay between different trader types.

Keywords: oil price dynamics, endogenous bubbles, STR GARCH model

JEL Classification: Q33, D84

Suggested Citation

Reitz, Stefan and Slopek, Ulf D., Nonlinear Oil Price Dynamics: A Tale of Heterogeneous Speculators? (2008). Bundesbank Series 1 Discussion Paper No. 2008,10, Available at SSRN: https://ssrn.com/abstract=2785318

Stefan Reitz (Contact Author)

German Federal Bank - Economics Department ( email )

Wilhelm-Epstein-Str. 14
60431 Frankfurt
Germany

Ulf D. Slopek

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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