Oil Prices and the Global Economy

31 Pages Posted: 23 Mar 2017

See all articles by Rabah Arezki

Rabah Arezki

World Bank - African Development Bank

Douglas Laxton

International Monetary Fund (IMF) - Research Department

Akito Matsumoto

International Monetary Fund (IMF)

Armen Nurbekyan

CBA

Hou Wang

International Monetary Fund (IMF)

Jiaxiong Yao

International Monetary Fund (IMF)

Date Written: January 2017

Abstract

This paper presents a simple macroeconomic model of the oil market. The model incorporates features of oil supply such as depletion, endogenous oil exploration and extraction, as well as features of oil demand such as the secular increase in demand from emerging-market economies, usage efficiency, and endogenous demand responses. The model provides, inter alia, a useful analytical framework to explore the effects of: a change in world GDP growth; a change in the efficiency of oil usage; and a change in the supply of oil. Notwithstanding that shale oil production today is more responsive to prices than conventional oil, our analysis suggests that an era of prolonged low oil prices is likely to be followed by a period where oil prices overshoot their long-term upward trend.

Keywords: Oil prices, Oil sector, Supply and demand, Oil production, Econometric models, Oil market; macroeconomic model; depletion; consumption efficiency; technology; cycle.

JEL Classification: C11, C53, Q31, Q32

Suggested Citation

Arezki, Rabah and Laxton, Douglas and Matsumoto, Akito and Nurbekyan, Armen and Wang, Hou and Yao, Jiaxiong, Oil Prices and the Global Economy (January 2017). Available at SSRN: https://ssrn.com/abstract=2938318 or http://dx.doi.org/10.2139/ssrn.2938318

Rabah Arezki (Contact Author)

World Bank - African Development Bank ( email )

15 Avenue du Ghana
P.O.Box 323-1002
Tunis-Belvedère
Tunisia

Douglas Laxton

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Akito Matsumoto

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Armen Nurbekyan

CBA ( email )

Vazgen Sargsyan 6
Armenia

Hou Wang

International Monetary Fund (IMF) ( email )

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

Jiaxiong Yao

International Monetary Fund (IMF) ( email )

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

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