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The Di ¤ erential E ¤ ects of Oil Demand and Supply Shocks on the Global Economy
| Content Provider | Semantic Scholar |
|---|---|
| Author | Mohaddes, Kamiar Raissi, Maziar |
| Copyright Year | 2013 |
| Abstract | We employ a set of sign restrictions on the impulse responses of a Global VAR model, estimated for 38 countries/regions over the period 1979Q22011Q2, as well as bounds on impact price elasticities of oil supply and oil demand to discriminate between supply-driven and demand-driven oil-price shocks, and to study the time pro le of their macroeconomic e¤ects across a wide range of countries and real/ nancial variables. We show that the above identi cation scheme can greatly bene t from the cross-sectional dimension of the GVAR by providing a large number of additional cross-country sign restrictions and hence reducing the set of admissible models. The results indicate that the economic consequences of a supply-driven oil-price shock are very di¤erent from those of an oil-demand shock driven by global economic activity, and vary for oilimporting 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 inationary pressures, an increase in real output, a rise in interest rates, and a fall in equity prices. JEL Classi cations: C32, E17, F44, F47, Q41. Keywords: Global VAR (GVAR), interconnectedness, global macroeconomic modeling, sign restrictions, impulse responses, international business cycle, oil-demand and oil-supply shocks. We are grateful to Alberto Behar, John Christopher Bluedorn, Samir Ghazouani, Joong Shik Kang, Lutz Kilian, Michael Kumhof, and Adrian Pagan as well as seminar participants at the IMF, the European Bank for Reconstruction and Development, the University of St Andrews, Kuwait Institute for Scienti c Research, the Economic Research Forum 19th Annual Conference, and the University of Gothenburg for constructive comments and suggestions. We would also like to thank the Editors (Richard S.J. Tol and John P. Weyant) and two anonymous referees for most helpful suggestions. Kamiar Mohaddes acknowledges nancial support from the Economic Research Forum (ERF). The views expressed in this paper are those of the authors and do not necessarily represent those of the International Monetary Fund, IMF policy, or the ERF. yCorresponding author. Email address: mraissi@imf.org. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://www.repository.cam.ac.uk/bitstream/handle/1810/254189/Cashin%202014%20Energy%20Economics.pdf;jsessionid=35C0FCA5B4EAB0DAEA243314C55D979D?sequence=1 |
| Alternate Webpage(s) | http://www.econ.cam.ac.uk/teach/mohaddes/GVAR_Oil.pdf |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | Cations Cross-sectional data Email Epidermodysplasia Verruciformis Exporter (computing) Interconnectedness MALL gene Money Shock Ultima VIII: Pagan Vector autoregression |
| Content Type | Text |
| Resource Type | Article |
