The Impact of Higher Oil Prices on the Global Economy - a Tale of Two Different Cases

52 Pages Posted: 20 Dec 2004 Last revised: 1 Mar 2014

See all articles by Pingfan Hong

Pingfan Hong

United Nations - Department of Economic and Social Affairs (DESA)

Edouard Nsimba

United Nations - Department of Economic and Social Affairs (DESA)

Carl Gray

United Nations - Department of Economic and Social Affairs (DESA)

Oumar Diallo

United Nations

Date Written: November 22, 2004

Abstract

Most studies of the macroeconomic impact of higher oil prices do not distinguish two different cases of higher oil prices: the demand-driven versus supply-driven. As result, these studies, particularly those quantitative ones, would either underestimate the acuteness of a true supply-side oil shock or exaggerate the impact of higher oil prices driven mainly by increase global demand. This paper shows that the macroeconomic implications of these two cases are different: one is more an indication that the global economic growth is at or beyond the potential supported by global oil supply, while only the other could be defined as an oil shock.

Keywords: Oil shocks, model simulation, macroeconomic policy

JEL Classification: E32, C53

Suggested Citation

Hong, Pingfan and Nsimba, Edouard and Gray, Carl and Diallo, Oumar, The Impact of Higher Oil Prices on the Global Economy - a Tale of Two Different Cases (November 22, 2004). Available at SSRN: https://ssrn.com/abstract=632367 or http://dx.doi.org/10.2139/ssrn.632367

Pingfan Hong (Contact Author)

United Nations - Department of Economic and Social Affairs (DESA) ( email )

New York, NY 10017
United States
212-963-4701 (Phone)
212-963-1061 (Fax)

Edouard Nsimba

United Nations - Department of Economic and Social Affairs (DESA)

New York, NY 10017
United States

Carl Gray

United Nations - Department of Economic and Social Affairs (DESA)

New York, NY 10017
United States

Oumar Diallo

United Nations ( email )

New York, NY 10017
United States

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