on the impacts of oil price fluctuations on european equity markets volatility spillover and hedging effectiveness the objective of this paper is to investigate the volatility spillovers between oil and stock markets in europe as not all industries are expected to be equally affected by oil price changes we conduct our study at both the aggregate as well as sector levels empirically we make use of a recently developed var garch approach which allows for transmissions in volatilities in addition we analyze the optimal weights and hedge ratios for oil stock portfolio holdings based on our results on the whole our findings show significant volatility spillovers between oil price and sector stock returns and suggest that a better understanding of those links is crucial for portfolio management in the presence of oil price risk

the role of the trade channel in the propagation of oil supply shocks abstract this paper analyzes when and why idiosyncratic oil supply shocks produce large macroeconomic effects in an analytically tractable two country general equilibrium model we focus on a demand driven mechanism the trade channel which transmits oil shocks across economies through changes in the non oil goods terms of trade when the trade channel is operative we have three main consequences on the transmission of oil shocks first the macroeconomic impact of oil shocks may be large and asymmetric across countries second the magnitude of the effects is nonlinear in the size of the oil shock third terms of trade movements never ensure international risk sharing after an idiosyncratic oil supply shock

oil price shocks and the macroeconomy this paper examines the impact of oil price shocks and attempts to explain why the rise in oil prices up to 2008 had little impact on the world economy it makes three main arguments first that oil prices have never been as important as is popularly thought second that the most important route through which oil prices affect output is monetary policy when oil prices pass through to core inflation monetary authorities raise interest rates slowing growth based on the second argument the third argument is that high oil prices have not reduced growth in recent years because they no longer pass through to core inflation so the monetary tightening previously seen in response to high oil prices is absent it also argues that oil prices had little impact on the global recession of 20089

agricultural price distortions trends and volatility past and prospective thanks are due to the australian research council the rural industries research and development corporation and the world bank for financial assistance

oil supply shocks and international policy coordination abstract this paper examines the value of international cooperation in an oil supply disruption the perspective is that of oil importing countries since the oil market is integrated internationally the actions of one have spillover effects on the others we focus on buffer stock policies with each player maximizing the present value of national income less the cost of operating the stockpile program we contrast cooperative and cournot nash solutions to the dynamic game paying special attention to the asymmetries between small and large countries the principal results are reviewed to assess the viability of current international agreements

regime switching in the reactions of stock markets in saudi arabia to oil price variations the study revisits the stock oil nexus by examining the reactions of equity markets to oil price shocks at national and sectoral levels for saudi arabia in a time varying framework by employing the markov switching egarch model developed by henry 2009 journal of banking and finance 33 405 based on weekly data the findings reveal that the behaviour of all stock markets switches between an expansion regime and a recession regime with more persistence for the expansion state additionally influential international events associated with stock market drops are clearly identified in the recession regime furthermore there is evidence of asymmetric reactions of the equity index returns and the probabilities of transition from one state to another to oil price variations with heterogeneous impacts across sectors and regimes the stock markets are more sensitive to oil price decreases than to oil price increases although the evidence of relatively slight differences in some findings across weekdays the study allows investors and policymakers to understand well the interactions of stock sector markets vis a vis the world oil market in a regime switching framework in order to make the right decision as regards portfolio diversification and regulation of the stock markets

oil price shocks economic policy uncertainty and industry stock returns in china asymmetric effects with quantile regression abstract this paper investigates the impact of crude oil shocks and china s economic policy uncertainty on stock returns at different locations on the return distributions based on monthly data from 1995 1 to 2016 3 we address this issue by employing the quantile regression technique this approach enables a more detailed investigation in different market circumstances namely bearish normal and bullish markets empirical results indicate that the effects of oil price shocks and economic policy uncertainty are asymmetric and highly related to stock market conditions moreover both the nexus of oil and economic policy uncertainty stock are changed at the onset of a crisis specially rising oil prices have greater negative effects on stock returns when stock markets are bullish extreme higher quantiles before a crisis whereas the effects are significantly positive under different market conditions after the onset of the crisis falling oil prices lower stock returns when stock markets are bullish and normal before the crisis whereas lower stock returns under different market conditions except extreme bullish after the onset of the crisis these findings might be related to the optimistic or pessimistic investor sentiments and investors might become more frightened after the crisis

the effects of oil price shocks on expenditure category cpi in this study we apply a two block structural vector autoregressive var model proposed by kilian and park 2009 in order to investigate the dynamic effects of changes in oil price on the expenditure category consumer price index cpi in the united states and japan our results confirm that each expenditure category price index responded very differently to the same structural shock and that whether changes in oil price function as a positive stimulus or a negative shock for the individual expenditure category prices also depends on the kind of underlying shock that drives the changes in oil price finally our results also reveal that the manner in which changes in oil price affect each expenditure category price differs between the united states and japan and these detailed level differences may lead to aggregate level differences in the price response of both countries to changes in oil price

does high frequency crude oil futures data contain useful information for predicting volatility in the us stock market new evidence abstract this study examines whether high frequency crude oil futures data contain useful information to forecast the realized volatility rv of the us stock market from both in and out of sample perspectives there are several significant findings first from the in sample analysis crude oil futures rv exhibits a significant positive impact on the future s p 500 volatility second the out of sample results reveal that the prediction models including crude oil futures rv outperform the related competing models implying that crude oil rv is an important predictive factor for the us stock market third we further find that the primary forecasting ability of crude oil rv is reflected in high frequency information negative crude oil rv and high volatility level finally the out of sample empirical results based on different forecasting windows alternative forecast evaluation approaches subsample analysis different prediction models alternative midas lags and controlling the leverage effect are robust to our conclusions

volatility spillovers between oil prices and stock sector returns implications for portfolio management abstract in this article we take a recent generalized var garch approach to examine the extent of volatility transmission between oil and stock markets in europe and the united states at the sector level the empirical model is advantageous in that it typically allows simultaneous shock transmission in the conditional returns and volatilities insofar as volatility transmission across oil and stock sector markets is a crucial element for portfolio designs and risk management we also analyze the optimal weights and hedge ratios for oil stock portfolio holdings with respect to the results our findings point to the existence of significant volatility spillover between oil and sector stock returns however the spillover is usually unidirectional from oil markets to stock markets in europe but bidirectional in the united states our back testing procedures finally suggest that taking the cross market volatility spillovers estimated from the var garch models often leads to diversification benefits and hedging effectiveness better than those of commonly used multivariate volatility models such as the ccc garch of bollerslev 1990 the diagonal bekk garch of engle and kroner 1995 and the dcc garch of engle 2002

can a carbon permit system reduce spanish unemployment this paper analyses the impact of carbon policy on unemployment in spain and whether recycling the public revenues earned from permit auctions can alleviate this problem while spain s deviation from the european union s intermediate emission goals is more serious than most other member countries unemployment in spain is also well above average for the european union we use a computable general equilibrium model that includes unemployment in the markets for unskilled and skilled labour we find that introducing carbon permits does not aggravate spanish unemployment in fact if supplied with revenue recycling schemes unemployment rates may actually fall contrary to other european studies we find that the best option is to reduce payroll taxes on relatively skilled types of labour this reform is successful in both increasing labour demand and dampening the supply response to rising wages however while all of the recycling schemes generate dividends in terms of aggregate welfare none entirely offsets the abatement costs

international bureaucrats and the formation of intergovernmental organizations institutional design discretion sweetens the pot bureaucrats working in international intergovernmental organizations igos regularly help states design new igos sometimes international bureaucrats possess limited discretion in institutional design sometimes they enjoy broad discretion in fact they gain discretion even when they openly oppose state preferences this contravenes conventional thinking about delegation discretion should decrease as preference divergence between states and international bureaucrats increases we develop a principal agent theory of how much discretion states grant to international bureaucrats in the design of new igos this is novel while principal agent theories of international delegation are common scholars have not analyzed principal agent relationships in the creation of new igos we argue that even an international bureaucracy that disagrees with states design preferences may enjoy substantial design leeway because of states need for bureaucratic expertise in developing this argument we employ a formal principal agent model case studies and an original data set

analysing systemic risk and time frequency quantile dependence between crude oil prices and brics equity markets indices a new look abstract this paper examines the dependence structure and the systemic risk between the return series of oil prices and the brics equity market indices using the newly developed methods of the quantile coherency of barunik and kley 2015 and the nonparametric conditional value at risk causality ncovar and the ncovar granger causality tests ncovar gc of diks and wolski 2018 for the period 2001 2018 further the traditional tests of hiemstra and jones 1994 and diks panchenko 2005 are used for comparison purposes the new methods have given rise to findings that are substantially different from those based on the two traditional approaches from our frequency dependence analysis we find a significant long term dependence coherency between the russian brazilian and south african stock markets and oil shifts however the ncovar analysis demonstrates a robust instantaneous dependence in both directions between almost all of the brics stock markets the exception is the indian market and the oil market the ncovar gc analysis reveals a robust lagged dependence from the oil market onto the chinese stock market only these findings provide helpful insights for regulators and potential international investors

paper oil real oil and the price of oil abstract the purpose of this paper is to provide a non technical explanation of the effect of derivative markets on oil pricing during the first three months of the gulf crisis and to make some observations concerning the utility of oil inventories when panic buying occurs some attention is also paid to the outlook for oil prices in the light of the gulf crisis the basic point brought out here is that oil futures markets have functioned as shock transmitters in that they have increased the sensitivity of oil prices to the minute by minute judgements of oil traders and their clients who at least a part of the time are completely out of touch with oil market fundamentals an opinion is also given taht in the post crisis era long run supply could be enhanced and oil market turbulence reduced by an expanded cooperation between oil exporters and importers

optimal path for china s strategic petroleum reserve a dynamic programming analysis abstract this paper proposes a dynamic programming model to explore the optimal stockpiling path for china s strategic petroleum reserve before 2020 the optimal oil acquisition sizes in 2008 2020 under different scenarios are estimated the effects of oil price risks and elasticity value on inventory size are further investigated it is found that the optimal stockpile acquisition strategies are mainly determined by oil price and total inventory costs while oil supply disruption is not considered china s optimal stockpile acquisition rate increases from 19 2 to 52 million barrels from 2008 to 2020 if an oil supply disruption occurs the oil acquisition rate will be reduced significantly however it may not be a good strategy to interrupt oil reserve activities in order to minimize the total costs for the entire planning period

the effects of energy price technology and disaster shocks on china s energy environment economy system abstract this paper constructs a dynamic stochastic general equilibrium dsge model to analyze the effects of energy price technology and disaster shocks on china s energy environment economy 3e system it also studies stylized facts as well as co integration and error correction dynamic analyses of this system the disaster shock is modeled as a two state markov switching process the results show that both technology and energy price shocks increase the ratio of environmental investment to gdp the improvement in technology and rising energy prices helps to reduce co2 pollution and improve economic restructuring among the three kinds of shocks technology shock is the most important the robustness of the model is tested through statistical methods

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

a note on the possibility of an international equilibrium with low levels of activity abstract this note studies the interaction through international trade of decision making in two countries where the decision makers have preferences regarding the level of economic activity and the balance of trade non cooperative and cooperative equilibria in the sense of game theory are studied it is demonstrated that non cooperative equilibria can easily be sub optimal for a complete characterization it is necessary to take into account the capacity constraints in both countries this leads to the possibility of many different types of equilibrium situations as well as to the possibility that no non cooperative equilibrium in pure strategies will exist this fact may point to an inherent difficulty in decision making concerning demand management in an international system

oil and stock market volatility a multivariate stochastic volatility perspective abstract this paper models the volatility of stock and oil futures markets using the multivariate stochastic volatility structure in an attempt to extract information intertwined in both markets for risk prediction it offers four major findings first the stock and oil futures prices are inter related their correlation follows a time varying dynamic process and tends to increase when the markets are more volatile second conditioned on the past information the volatility in each market is very persistent i e it varies in a predictable manner third there is inter market dependence in volatility innovations that hit either market can affect the volatility in the other market in other words conditioned on the persistence and the past volatility in their respective markets the past volatility of the stock oil futures market also has predictive power over the future volatility of the oil futures stock market finally the model produces more accurate value at risk estimates than other benchmarks commonly used in the financial industry

strategic oil stockpiling for energy security the case of china and india abstract compared with the developed countries the developing countries could be more vulnerable to oil supply disruptions due to their lack of strategic petroleum reserves sprs several developing countries including china and india are establishing their sprs to ensure energy security in the common world oil market one country s spr decisions can be affected by the decisions of other countries this paper investigates the spr policies of china and india two of the largest developing countries in a game theoretic framework where the interactions between the two countries are taken into account the results show that players equilibrium stockpiling strategies and total expected costs could vary significantly with the initial oil market state stockpile acquisition capacity and the probabilities for disruptions to persist

oil shocks and monetary policy rules in emerging economies we examine the effects of shocks in the oil market on key macroeconomic variables in small open economies using a dynamic stochastic general equilibrium model with sticky prices and imperfect competition under different monetary policy rules the numerical solutions show that the types of exchange rate regimes and monetary policies could partly explain the trends in macroeconomic volatilities considering negative shocks to oil supply hamilton 1983 and positive shocks to oil demand kilian 2009 these findings are confirmed in vector autoregressive responses for chile and israel with inflation targeting under flexible exchange regimes and hong kong with fixed regime

energy and economic growth in the usa a multivariate approach abstract this paper examines the causal relationship between gdp and energy use for the period 1947 90 in the usa the relationship between energy use and economic growth has been examined by both biophysical and neoclassical economists in particular several studies have tested for the presence of a causal relationship in the granger sense between energy use and economic growth however these tests do not allow a direct test of the relative explanatory powers of the neoclassical and biophysical models a multivariate adaptation of the test vector autoregression var does allow such a test a var of gdp energy use capital stock and employment is estimated and granger tests for causal relationships between the variables are carried out although there is no evidence that gross energy use granger causes gdp a measure of final energy use adjusted for changing fuel composition does granger cause gdp

foreign exchange premia and non neutrality of monetary policy in general equilibrium models abstract we present a simple monetized extension of a traditional small country real side general equilibrium trade model in which premia on foreign exchange occur with the value of the quota and the quota premium endogenously determined monetary policy is non neutral in the model and has real effects illustrated using a small open economy general equilibrium model of the philippines which includes foreign exchange premia the results emphasize the importance of incorporating domestic monetary policy fixed exchange rates and associated foreign exchange premia when analyzing the trade policy regime in such a country

does the source of oil price shocks matter for south african stock returns a structural var approach abstract in this paper we investigate the dynamic relationship between different oil price shocks and the south african stock market using a sign restriction structural var approach for the period 1973 01 to 2011 07 the results show that for an oil importing country like south africa stock returns only increase with oil prices when global economic activity improves in response to oil supply shocks and speculative demand shocks stock returns and the real price of oil move in opposite directions the analysis of the variance decomposition shows that the oil supply shock contributes more to the variability in real stock prices the main conclusion is that different oil price shocks affect stock returns differently and policy makers and investors should always consider the source of the shock before implementing a policy and making investment decisions

the heterogeneity dependence between crude oil price changes and industry stock market returns in china evidence from a quantile regression approach this paper explores the dependence between real crude oil price changes and chinese real industry stock market returns based on the monthly data from 1994 03 to 2014 06 we address this issue using the quantile regression approach enabling a more detailed investigation of structure and degree of dependence empirical results reveal that the reaction of market returns to crude oil is highly heterogeneous across conditional distribution of industry stock returns furthermore there is evidence that this dependence is positive and exists only in recessions or bearish markets with low expected returns the dependence at low quantiles is not limited to one market but is a common feature across industries additionally dependence also changes since the onset of structural breaks we determine that chinese industry stock and global crude oil markets have contagion in rare situations most cases do not demonstrate contagion

international business cycles world region and country specific factors the paper investigates the common dynamic properties of business cycle fluctuations across countries regions and the world we employ a bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates output consumption and investment in a 60 country sample covering seven regions of the world the results indicate that a common world factor is an important source of volatility for aggregates in most countries providing evidence for a world business cycle we find that region specific factors play only a minor role in explaining fluctuations in economic activity we also document similarities and differences across regions countries and aggregates jel f41 e32 c11 c32

commodity price volatility with endogenous natural resources abstract natural resource reserves are exogenous in models of small commodity exporters changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility trade dynamics or exchange rate volatility we consider richer supply dynamics and model exploration and depletion we show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency the crowding out of non commodity activity dutch disease and a volatile business cycle we also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies when natural resource reserves are held fixed monetary policy is an efficient tool for stabilising the effects of commodity price shocks however when exploration and depletion are accounted for using interest rates to stabilise the effects of commodity price changes becomes inefficient using taxes on the resource sector specifically an ad valorem royalty remains efficient

the effects of oil price shocks on output and inflation in china crude oil price shocks derive from many sources each of which may bring about different effects on macro economy variables and require completely different designs in macro economic policy thus distinguishing the sources of oil price fluctuations is crucial when evaluating these effects this paper establishes an open economy dynamic stochastic general equilibrium dsge model with two economies china and the rest of the world to assess the effects of oil price shocks the ces production function is extended by adding oil as an input based on the model the effects of four types of oil price fluctuations are evaluated the four types of oil price shocks are supply shocks driven by political events in opec countries other oil supply shocks aggregate shocks to the demand for industrial commodities and demand shocks that are specific to the crude oil market simulation results indicate the following oil supply shocks driven by political events mainly produce short term effects on china s output and inflation while the other three shocks produce relatively long term effects in addition demand shocks that are specific to the crude oil market contribute the most to the fluctuations in china s output and inflation

a general equilibrium analysis of foreign exchange shortages in a developing economy an acute shortage of foreign exchange has been a recurring problem for many developing economies this paper reexamines the foreign exchange gap issue and the debate between structuralists and neoclassicists by providing a quantitative assessment of the role of different assumptions about the values of key trade elasticities it also seeks to complement the existing descriptive analysis of the consequences of alternative adjustment mechanisms with a quantitative analysis that indicates the relative importance of different behavioural assumptions and policy regimes the empirical analysis is based on a computable general equilibrium model which is walrasian in spirit and captures price mechanisms market interactions and structural interdependence in a non linear multisector framework the analysis lends support to the structuralist view that it is not sufficient to look at problems of adjustment only at the macroeconomic level

dynamic cyclical comovements between oil prices and us gdp a wavelet perspective abstract in this paper we use wavelet analysis to investigate the cyclical comovements between crude oil prices and us gdp taking into account the decline in the volatility of us gdp growth that has occurred since the mid 1980s our main findings suggest that before 1984 q1 the crude oil prices were leading the us gdp cycle by 3 quarters and granger cause us gdp in contrast after 1984 q1 the crude oil prices were lagging the us business cycle and a reverse causality is found to run from us gdp to oil prices the multiscale granger causality tests globally corroborate theses results

investment and market power abstract this paper argues that the degree of market power within an industry is an important determinant of interindustry differences in investment behavior a neoclassical investment model is analyzed to show that market power is positively associated with capital stock flexibility the intuition for the result is that firms adjust their stocks and investment plans quickly in response to new conditions so as to capture the rents asssociated with their market power

historical energy price shocks and their changing effects on the economy abstract the purpose of this paper is to identify the changes in the impact of energy shocks on economic activity with an interest in assessing if an economy s vulnerability and resilience to shocks improved with economic development using data on the united kingdom over the last three hundred years the paper identifies supply aggregate demand and residual shocks to energy prices and estimates their changing influence on energy prices and gdp the results suggest that the impacts of supply shocks rose with its increasing dependence on coal and declined with its partial transition to oil however the transition from exporting coal to importing oil increased the negative impacts of demand shocks more generally the results indicate that improvements in vulnerability and resilience to shocks did not progress systematically as the economy developed instead the changes in impacts depended greatly on the circumstances related to the demand for and supply of energy sources if these experiences are transferable to future markets a transition to a diversified mix of renewable energy is likely to reduce vulnerability and increase resilience to energy price shocks

fisher phillips friedman and the measured impact of inflation on interest a reply the purpose of this paper is to demonstrate that empirical findings which persistently appear to contradict the fisher hypothesis that the nominal rate of interest should rise by the full amount of an increase in anticipated inflation are due basically to a failure to control for changes in the real rate of interest that are associated with changes in anticipated inflation we are guided in our search for proper specification of a fisher equation by a simple general equilibrium model which is employed to derive the impact of a change in anticipated inflation upon nominal interest given the requirement that commodity money and labor markets remain in equilibrium in effect we depart from the empirical tradition which has grown up around testing of the fisher hypothesis that takes the real interest rate to be independent of anticipated inflation and argues that for anticipated inflation properly measured the data ought to support the fisher hypothesis 1

realized volatility transmission between crude oil and equity futures markets a multivariate har approach this paper differs from extant literature because it studies volatility co movements with a multivariate orthogonalized har model a flexible specification for the time series of realized volatility which is able to identify short mid and long term spillover effects we examine volatility transmission mechanisms using high frequency data of the stock index futures on s p 500 nikkei 225 ftse 100 and the futures on the west texas intermediate crude oil during the period from september 2002 to september 2012 considering the full sample the short term volatility of the equity futures contains information about future oil volatility incremental to the information inherent in the time series of oil volatility on the other hand weekly and monthly volatilities do not exhibit a significant spillover effect breaking the whole sample into three subsamples no significant granger causalities are observed in the pre crisis period while in the crisis time and its aftermath we document that the us and uk equity market volatilities to granger cause the oil futures volatility which itself leads the japanese market in terms of magnitude we observe an increase in the short term volatility spillover over time studying the residuals of the har transmission models within a ccc dcc garch framework reveals increasing instantaneous correlation between the energy and equity volatilities in the course of time

oil shocks and production network structure evidence from the oecd abstract does the production network structure matter for the transmission of oil shocks using a bayesian time varying var the paper derives the impact of oil shocks on gdp for a set of oecd economies it further estimates various measures to characterize the production network structure based on input output matrices when the relationship between the time varying responses of gdp to oil demand and oil supply shocks and production network characteristics is analyzed the paper finds that measures like skewness in the in degrees and in the out degrees or density tend to amplify the negative impact of oil shocks on gdp the results here are in line with the recent literature that outlines the importance of network structures for aggregate dynamics

a wavelet analysis of mean and volatility spillovers between oil and brics stock markets this paper investigates the spillover effects of volatility and shocks between oil prices and the brics stock markets using multivariate approach and wavelet analysis at different time horizons hence we combine a multivariate arma garch model and wavelet multiresolution analysis to study this phenomenon a bivariate arma 1 1 garch 1 1 cdcc student t model was joined with modwt filter to capture a broad range of possible spillover effects in mean and variances of level prices at various time horizons generally empirical results provide strong evidence of time varying volatility in all markets under study however our proposed approach shows that oil price and stock market prices are directly affected by their own news and volatilities and indirectly affected by the volatilities of other prices and wavelet scale the results show also that mean and volatility spillover effects was decomposed into many sub spillovers on different time scales according to heterogeneous investors and market participants the practical implications of this study are critical innovative and useful for the local and international investors and also for the portfolio managers they can utilize this study to formulate the optimal oil bricks stock portfolios as well as lead to more accurate predictions of volatility spillovers patterns also in developing their hedging strategies

oil price shocks and stock markets in the u s and 13 european countries abstract oil price shocks have a statistically significant impact on real stock returns contemporaneously and or within the following month in the u s and 13 european countries over 1986 1 2005 12 norway as an oil exporter shows a statistically significantly positive response of real stock returns to an oil price increase the median result from variance decomposition analysis is that oil price shocks account for a statistically significant 6 of the volatility in real stock returns for many european countries but not for the u s increased volatility of oil prices significantly depresses real stock returns the contribution of oil price shocks to variability in real stock returns in the u s and most other countries is greater than that of interest rate an increase in real oil price is associated with a significant increase in the short term interest rate in the u s and eight out of 13 european countries within one or two months counter to findings for the u s and for norway there is little evidence of asymmetric effects on real stock returns of positive and negative oil price shocks for oil importing european countries

an empirical analysis of the relationship between oil prices and the chinese macro economy using the quarterly data from the first quarter of 1996 to the fourth quarter of 2014 this paper studies the relationship between oil prices and the chinese macro economy we find output and interest rate respond significantly to oil price shocks further analysis reveals that the positive response of output to oil price shocks is attributed to the influences of oil price shocks on exports the oil price shocks have both longer and deeper effects on the exports of state owned enterprises than on those of foreign investment enterprises moreover the response of exports to oil price shocks is symmetric finally oil prices are found to be useful for forecasting the china s exports in the periods shorter than about two years

immiserizing growth and endogenous protection abstract this paper focuses on immiserizing growth in the two senses of bhagwati 1958 and johnson 1967 and how both the likelihood that either may occur and their extent can be affected by the presence of endogenous protection i e quota and other forms of protection for which the ad valorem equivalent level of protection is endogeneously determined we use a general equilibrium model of the philippines due to clarete 1984 to compute counterfactual equilibria involving changes in domestic policies terms of trade and resource endowments immiserizing growth in the sense of bhagwati is less likely because the terms of trade fall required to offset the growth of resources has to be significantly larger if no distortions are in the model immiserizing growth in the sense of johnson tends to be more likely if endogeneous protection is present as unbalanced growth occurs focused on the factor intensive in the protected sector resources are drawn out of the export sector and export earnings decline and if the level of protection is endogenously determined the welfare costs of protection increase

the sub trigger crisis an economic analysis of flexible stock policies abstract this paper investigates the value of international cooperation during an oil supply disruption the international energy agency provides the aegis for energy cooperation among the industrialized countries but only an enormous disruption would trigger the agency s emergency mechanism smaller sub trigger disruptions have occurred three times in the past decade and twice in 1973 1974 and again in 1979 the result was havoc in the international oil markets and substantial economic damage general consensus credits oil inventory accumulation with exacerbating these shocks and decumulation with averting similar problems during the 1980 disruption the paper employs a small short run econometric model of the oil market to examine inventory behaviour and to test coordinated government stockpile drawdowns termed flexible stock policies which have been proposed to address these issues impacts on gnp are obtained by solving the oil market model simultaneously with an econometric model of the us macro economy

oil price shocks and china s economy reactions of the monetary policy to oil price shocks abstract the paper empirically analyzes the effect of positive oil price shocks on china s economy having special interest in the response of the chinese interest rate to those shocks using different econometric models i a time varying parameter structural vector autoregression tvp svar model with short run identifying restrictions ii a structural var svar model with the short run identifying restrictions and iii a var model with ordering free generalized impulse response var gir var we find that the response of the chinese interest rate to the oil price shocks is not only time varying but also showing quite different signs of responses specifically in the earlier sample period 1992 4 2001 10 the interest rate shows a negative response to the oil price shock while in the latter period 2001 11 2014 5 it shows a positive response to the shock given the negative response of the world oil production to an oil price shock in the earlier period the shock is identified as a negative supply shock or a precautionary demand shock as suggested by kilian 2009 thereby the negative response of the interest rate to the oil price shock is deemed as economy boosting the positive response of the interest rate to the oil price shock in the later period given that this shock is identified as a positive world oil demand shock gives evidence that stabilization of inflation is one of the main objectives of china s monetary authority even though the current main objective of the monetary policy is characterized as maintaining the stability of the value of the currency and thereby promoting economic growth finally the variance decomposition results reveal that the oil price shock becomes an increasingly important source in the volatility of china s interest rate

inventory optimization in the u s petroleum industry empirical analysis and implications for energy emergency policy much of the rapid increases in the price of crude oil during two of the last three supply shocks has been attributed to increased private inventory demand stimulated by the expectation of speculative profits government intervention in any future disruption is likely to take the form of releases from the strategic petroleum reserve spr given that the spr accounts for but a small fraction of u s oil inventories the reaction of the private sector is critical in evaluating its impact we incorporate inventory behavior in a model of the world oil market which is then linked to a short run macroeconometric model of the u s economy our model simulations support the view that substantial inventory accumulation accompanies a supply disruption in the debate over whether the spr is potentially a potent or impotent resource in an emergency we lean toward potency our model suggests that public releases will not be absorbed in private stockpiles indeed their dampening price effects will serve albeit slig

self fulfilling expectations and the inflation of the 1970s evidence from the livingston survey abstract using survey data on expectations we examine whether the response of monetary policy to sudden movements in expected inflation contributed to the persistent high inflation of the 1970s the evidence suggests that prior to 1979 the fed accommodated temporary shocks to expected inflation which then led to persistent increases in actual inflation we do not find this behavior in the post 1979 data among commonly cited factors oil and fiscal shocks do not appear to have triggered an increase in expected inflation that eventually resulted in higher actual inflation

short term interest rates as predictors of inflation comment in this note i raise two questions regarding fama s results the first is whether similar tests based on an information set somewhat broader than the past history of consumer price inflation will support fama s findings the second is whether given fama s data and model his results fully support his hypotheses the answer to both questions is no if one accepts the accuracy of the data during fama s sample period the current monthly rate of change of consumer prices ct is significantly related to the three previous monthly rates of change of

asset prices and expected monetary policy evidence from daily data this article explores the relationships among libor gold prices the exchange rate oil prices fed funds futures prices and stock prices at a daily frequency this article examines whether expected monetary policy measured by changes in the prices of fed funds futures contracts reacts to high frequency changes in asset prices and in turn whether asset prices respond to changes in expected monetary policy the article reveals that there are statistically significant relationships between expected us monetary policy and shocks to libor and exchange rates it also reveals that there is no evidence of a systematic relationship between stock prices and expected monetary policy changes splitting the data into expansionary and recessionary periods using nber dating we find results for the expansionary periods that are very similar to the results for the entire period for the periods of recession we find little evidence of significant linkages between markets

exogenous oil supply shocks how big are they and how much do they matter for the u s economy abstract the paper proposes a new measure of exogenous oil supply shocks the timing the magnitude and the sign of this measure may differ greatly from current state of the art estimates it is shown that only a small fraction of the observed oil price increases during oil crisis periods can be attributed to exogenous oil production disruptions exogenous oil supply shocks cause a sharp drop of u s real gdp growth after five quarters rather than an immediate and sustained reduction in economic growth and a spike in cpi inflation after three quarters overall exogenous oil supply shocks made remarkably little difference for the evolution of the u s economy since the 1970s although they did matter for some historical episodes

impact of oil price shocks on output inflation and the real exchange rate evidence from selected asean countries this article analyses the impact of oil price shocks on real output inflation and the real exchange rate in thailand malaysia singapore the philippines and indonesia asean 5 using a structural var model the cointegration tests indicate that the macroeconomic variables of these countries are cointegrated and share common trends in the long run the impulse response functions reveal that oil price fluctuations do not impact the asean 5 economies in the long run and much of its effect is absorbed within five to six quarters the variance decomposition results further assert that with a few exceptions oil price shocks do not explain a significant variation in any of the variables under consideration we also identify a very unique pattern of response to oil price fluctuations between malaysia and singapore and between the philippines and thailand the pairs exhibit a high degree of similarity in their responses they do not share any commonalities across the group

oil prices and economic downturns the case of spain abstractwe address the macroeconomic effects of an oil price shock in spain we apply a vector autoregression model var analysis to quarterly data for the spanish economy since 1986 to elucidate the effects of variations in the oil price on the economy considering the three main causes of disruptions in the oil markets oil supply shocks oil demand shocks and oil specific precautionary demand shocks we conclude that the effects in spain strongly depend on the type of shock the consumer price index cpi has mainly been influenced by oil demand shocks output has only reacted to oil supply shocks and monetary policy has mainly reacted after precautionary shocks second round effects caused by the behaviour of nominal wages have not been found additionally we discuss two facts the ability of firms to increase markups in a context of rising demand and the procyclical role of monetary policy when faced with oil demand shocks

the cyclical behavior of monthly nymex energy prices abstract this paper systematically investigates the basic stylized facts of energy price movements using monthly data for the period that energy has been traded on organized exchanges and the methodology suggested by kydland and prescott kydland f e prescott e c 1990 business cycles real facts and a monetary myth fed reserve bank minneapolis q rev spring 3 18 the results indicate that energy prices are in general procyclical in contrast to the accepted fact that energy prices are countercyclical and leading the cycle

determinants of official opec crude prices the hypothesis of this paper is that crude oil like any other unfinished commodity is valued for the products derived from it the purpose is to offer an empirical explanation for changes in the crude price charged by the members of opec the model results show that the market clearing prices reported to prevail for petroleum products on the principal petroleum spot market at rotterdam are the primary determinants of changes in official crude prices a systematic relationship between offical and spot prices is argued to have prevailed since 1974 an appendix clarifies five types of data required for the model 13 references 4 tables

inventories and sticky prices more on the microfoundations of macroeconomics the role of inventories in making prices sticky is studied by analyzing a dynamic linear quadratic model of a monopoly firm facing stochastic demand but able to store its finished goods in inventory it is shown that in contrast to the usual presumption firms that exhibit the smallest output responses to demand fluctuations may also exhibit the smallest price fluctuations specifically firms which have very flexible inventory storage facilities or are subjected to very transitory demand shocks will rely on inventories as buffers and will change neither production nor price very much on the other hand firms which have very inflexible storage facilities or whose demand shocks are quite permanent will display large swings in both price and output the standard assumption about inventory carrying costs that has been used in the literature that they are linear is shown to imply that production is impervious to fluctuations in demand it is also established that prices may respond more strongly to positive demand shocks than to negative ones if it is impossible to hold negative inventories i e to have unfilled orders the model offers an explanation for stickiness in relative prices however under certain circumstances it may help explain the persistence of inflation this abstract was borrowed from another version of this item

commodity prices and fiscal policy design procyclical despite a rule recent studies offer evidence of reduced fiscal procyclicality to commodity price changes in resource rich countries a feature commonly attributed to the adoption of fiscal policy rules we revisit this issue and find that by controlling for global activity shocks while allowing for time varying changes in both fiscal policy and the volatility of shocks this finding does not hold to show this we develop a time varying dynamic factor model allowing for a multiple of shocks stochastic volatility and time varying parameters and estimate it on data for norway whose handling of resource wealth is often cited as exemplary

the causal nexus between oil prices and equity market in the u s a regime switching model abstract the aim of this paper is to analyse the causal link between monthly oil futures price changes and a sub grouping of s p 500 stock index changes the causal linkage between oil and stock markets is modelled using a vector autoregressive model with time varying parameters so as to reflect changes in granger causality over time a markov switching vector autoregressive ms var model in which causal link between the series is stochastic and governed by an unobservable markov chain is used for inferring time varying causality although we do not find any lead lag type granger causality the results based on the ms var model clearly show that oil futures price has strong regime prediction power for a sub grouping of s p 500 stock index during various sub periods in the sample while there is a weak evidence for the regime prediction power of a sub grouping of s p 500 stock indexes the regime prediction non causality tests on the ms var model show that both variables are useful for making inference about the regime process and that the evidence on regime prediction causality is primarily found in the equation describing a sub grouping of s p 500 stock market returns the evidence from the conditional non causality tests shows that past information on the other series fails to improve the one step ahead prediction for both oil futures and stock returns

short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant in an innovative and provocative paper in this review eugene fama presents evidence which appears to be consistent with the joint hypothesis that the real rate of interest ignoring taxes is a constant and that the market for u s treasury bills is efficient in the sense of embodying rational expectations those findings are strikingly at variance with a long list of previous studies which seemed to support the view that the real rate of interest varies over time and can be related to economic variables such as real output monetary policy and so forth 2 the methodologies which lead to these contradictory conclusions are quite different previous studies had followed the lead of irving fisher by relating nominal interest rates to distributed lags on past rates of inflation 3 these distributed lags are generally interpreted as approximations to the market s expected rate of inflation and thus any remaining variation is attributed to variation in the real rate 4 fama s methodology on the other hand draws on the fact that the difference between the market interest rate and the subsequently observed rate of inflation the ex post real interest rate consists by definition of the ex ante real interest rate plus a pure forecasting error 5 the hypothesis of market efficiency implies that these forecasting errors must be serially random thus observing ex post real rates is equivalent to observing ex ante real rates with random measurement error these errors of course confound the problem of identifying variation in the ex ante real rate in this paper we will argue that the relative magnitude of these measurement errors is such that the tests carried out by fama were not powerful enough to reject the joint hypothesis that the ex ante real rate is a constant and expectations are rational more powerful tests which are presented in this paper using the same data do lead to rejection of that hypothesis of course rejection

expectations learning and the changing relationship between oil prices and the macroeconomy this paper estimates a structural general equilibrium model to investigate the changing relationship between the oil price and macroeconomic variables the oil price through the role of oil in production and consumption affects aggregate demand and supply in the model the assumption of rational expectations is relaxed in favor of learning oil prices therefore affect the economy through an additional channel i e through their effect on the formation of agents beliefs the estimated learning dynamics indicates that economic agents perceptions about the effects of oil prices on the economy have changed over time oil prices were perceived to have large effects on output and inflation in the 1970s but only milder effects after the mid 1980s since expectations play a large role in the determination of output and inflation the effects of oil price increases on expectations can magnify the response of macroeconomic variables to oil price shocks in the estimated model in fact the implied responses of output and inflation to oil price shocks were much more pronounced in the 1970s than in 2008 therefore through the time variation in the impact of oil prices on beliefs the paper can successfully explain the observed weakening of the effects of oil price shocks on real activity and inflation