Oil Price Dynamics and Monetary Policy in a Heterogeneous Monetary Union

2013 ◽  
Vol 233 (2) ◽  
Author(s):  
Volker Clausen ◽  
Hans-Werner Wohltmann
Keyword(s):  
Monetary Policy ◽  
Monetary Union ◽  
Real Income ◽  
Oil Price ◽  
Adjustment Process ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Dynamic Simulations ◽  
Price Increases ◽  
Short Run

SummaryThis paper analyzes the dynamic effects of oil price increases in a small two-country monetary union with asymmetric wage adjustment equations. Common oil price shocks lead during the adjustment process to temporary divergences in output and inflation and also to reversals in the relative cyclical position across the monetary union. We distinguish between three types of oil price shocks: (1) an unanticipated permanent shock, (2) an unanticipated temporary shock and (3) an anticipated permanent shock.We illustrate the macroeconomic effects of these shocks by means of dynamic simulations and examine the respective stabilization role of monetary policy. While permanent oil price hikes always lead to stagflation, temporary shocks are associated with deflation in the very short run as the reduction of real income lowers the demand for the domestically produced good. The implications for monetary policy are also shock-specific. Monetary policy faces a signal extraction problem as it needs to determine whether oil price shocks are transitory or permanent in order to make appropriate decisions not only about the strength, but also the direction of monetary policy.

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

COMPARING THE IMPACTS OF OIL PRICE SHOCKS ACROSS STOCK MARKETS

2015 ◽  
Vol 77 (20) ◽  
Author(s):  
Siok Kun Sek ◽  
Zhan Jian Ng ◽  
Wai Mun Har
Keyword(s):  
Stock Returns ◽  
Stock Markets ◽  
Spillover Effect ◽  
Spillover Effects ◽  
Oil Price ◽  
Multivariate Garch ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Long Run ◽  
Short Run

We conduct empirical analyses on comparing the spillover effects of oil price shocks on the volatility of stock returns between oil importing and oil exporting countries. In particular, we seek to study how the nature of oil price shocks differs due to the oil dependency factor and how the stock markets react to such shocks. Applying the multivariate GARCH-BEKK(1,1) model, our results detect spillover effects between crude oil price and stock returns for all countries. The short run persistencies of shocks are smaller but the persistencies of shocks are very high in the long run. The results hold for both groups of countries. The results imply larger spillover effect from oil price shock into stock market in the oil importing countries.

A financial CGE model analysis: Oil price shocks and monetary policy responses in China

2015 ◽  
Vol 51 ◽  
pp. 534-543 ◽  
Author(s):  
Jing-Yu Liu ◽  
Shih-Mo Lin ◽  
Yan Xia ◽  
Ying Fan ◽  
Jie Wu
Keyword(s):  
Monetary Policy ◽  
Model Analysis ◽  
Oil Price ◽  
Cge Model ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Policy Responses

scholarly journals Oil Price Shocks, Systematic Monetary Policy and Economic Activity

2019 ◽  
Vol 58 (1) ◽  
pp. 65-81 ◽  
Author(s):  
Muhammad Zeshan ◽  
Wasim Shahid Malik ◽  
Muhammad Nasir
Keyword(s):  
Monetary Policy ◽  
Jel Classification ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Structural Vector Autoregression ◽  
Price Shocks ◽  
Output Loss ◽  
The Impact ◽  
Auto Regression ◽  
Structural Vector

This study quantifies the impact of oil price shocks and the subsequent monetary policy response on output for Pakistan. It employs a quarterly Structural Vector Auto-regression framework for the period 1993–2015. It first discovers that Hamilton’s (1996) Net Oil Price Increase indicator appropriately reveals most of the oil price shocks hitting Pakistan’s economy. We find that a contractionary monetary policy, resulting from the oil price shocks, contributes to significant output loss in Pakistan. After encountering the Lucas critique, the present study finds that around 42 percent of the output loss is due to the ensuing tight monetary policy. This suggests that the central bank of Pakistan can reduce the impact of oil price shocks by reducing its intervention in the market. JEL Classification: E1, E3, E5 Keywords: Oil Price Shocks, Monetary Policy, Structural Vector Autoregression

scholarly journals ECOWAS common currency, a mirage or possibility?

2020 ◽  
pp. 15-15
Author(s):  
Sagiru Mati ◽  
Irfan Civcir ◽  
Hüseyin Özdeşer
Keyword(s):  
Monetary Union ◽  
Shock Absorber ◽  
The Gambia ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Common Currency ◽  
Vision 2020 ◽  
Price Shocks ◽  
The Creation

Unlike previous studies, the current study uses oil price and inflationary shocks to assess the feasibility of actualizing the ECOWAS Vision 2020, which is aimed at creating a monetary union. With the help of the Blanchard and Quah (BQ) decomposition for a sample from 1975:05 to 2018:08, two sets of models are estimated: models for inflationary shocks and models for oil price shocks. It is found that although the vision is a mirage, the creation of a common currency can serve as a shock absorber against the negative spillovers of global and regional inflationary shocks. The study also finds that oil price shocks lead to appreciation of the currency for the oil exporting country Nigeria, while Nigeria, The Gambia and Ghana stand out in their responses to oil price shocks. The study recommends that these countries cannot be part of the Vision and that more coordination among ECOWAS members is needed before this Vision can be actualised.

scholarly journals Oil price shocks and China's economy: Reactions of the monetary policy to oil price shocks

2017 ◽  
Vol 62 ◽  
pp. 61-69 ◽  
Author(s):  
Won Joong Kim ◽  
Shawkat Hammoudeh ◽  
Jun Seog Hyun ◽  
Rangan Gupta
Keyword(s):  
Monetary Policy ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
China’S Economy
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