The macroeconomic and financial effects of oil price shocks

Zhou, Song and Wang, Dong (2012): The macroeconomic and financial effects of oil price shocks.

Abstract

The oil price shock is considered as a major contributor to economic fluctuation. In this paper, we investigate whether the impulse responses of different macroeconomic variables and financial variables to the oil price shock and the effect of interest rates change. And we also use Granger Causality Test to evaluate the correlation between oil prices, stock markets and gold prices. Estimation results based on the U.S. data suggest that: (i) The oil price shock has a significant impact on inflation, stock markets and gold prices and it also has a short-term impact on interest rates. (ii) Co-movement of oil prices, stock markets and gold prices exist. (iii) Changing interest rates as monetary policy can induce price puzzle in order to reduce the inflation caused by the oil price shock.

• Item Type: MPRA Paper
• Language: English
• Keywords: VAR, Granger Causality, oil prices
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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