Oil Prices and the Global Economy

2016 ◽  
Vol 16 (210) ◽  
Author(s):  
Kamiar Mohaddes ◽  
M. Pesaran
Keyword(s):  
Interest Rates ◽  
Global Economy ◽  
Negative Relationship ◽  
Oil Prices ◽  
The United States ◽  
Equity Prices ◽  
Demand And Supply ◽  
Time Period ◽  
Oil Markets ◽  
The 2008 Financial Crisis

The recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the United States and the global economy. In this paper, using a quarterly multi-country econometric model, we first show that a fall in oil prices tends relatively quickly to lower interest rates and inflation in most countries, and increase global real equity prices. The effects on real output are positive, although they take longer to materialize (around four quarters after the shock). We then re-examine the effects of low oil prices on the U.S. economy over different sub-periods using monthly observations on real oil prices, real equity prices and real dividends. We confirm the perverse positive relationship between oil and equity prices over the period since the 2008 financial crisis highlighted in the recent literature, but show that this relationship has been unstable when considered over the longer time period of 1946–2016. In contrast, we find a stable negative relationship between oil prices and real dividends which we argue is a better proxy for economic activity (as compared to equity prices). On the supply side, the effects of lower oil prices differ widely across the different oil producers, and could be perverse initially, as some of the major oil producers try to compensate their loss of revenues by raising production. Taking demand and supply adjustments to oil price changes as a whole, we conclude that oil markets equilibrate but rather slowly, with large episodic swings between low and high oil prices.

scholarly journals Global Outlook for 2018: Economy, Finance, and Monetary, with a Particular Case Study of Taiwan

2018 ◽  
Vol 10 (3) ◽  
pp. 133 ◽  
Author(s):  
Shyi-Min Lu
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Interest Rates ◽  
Global Economy ◽  
Average Rate ◽  
The United States ◽  
Gdp Growth ◽  
Advanced Economies ◽  
Global Economic Growth

In October 2017, IMF President Christine Lagarde declared that the GDP growth of world’s economies in the first half of 2017 was up to the broadest recovery since 2010. So far, the strength of global economic growth has been enhancing. The interest rates and inflation are still at a low level. The global economy has risen from the bottom in 2016 to reach its peak since 2011. As for the degree of economic development, the emerging markets grew fastest, followed by the developing countries, while the advanced economies grew moderately at an average rate around 2%. Manufacturing PMI in major countries, such as the United States, China, the Eurozone, and even Taiwan, have increased above 50 notably in the recent years, while the non-manufacturing PMI is also above 50. Accordingly, the main purpose of this paper is to forecast the global economy in 2018, which is on the trajectory of booming with a certain degree of uncertainty. A particular case study of Taiwan’s overall economic development is presented as well.

scholarly journals The Ricardian Approach to Budget Deficits

1989 ◽  
Vol 3 (2) ◽  
pp. 37-54 ◽  
Author(s):  
Robert J Barro
Keyword(s):  
Interest Rates ◽  
The United States ◽  
Alternative Theory ◽  
Budget Deficits ◽  
Large Current ◽  
Time Period ◽  
Ricardian Approach ◽  
David Ricardo ◽  
Harmful Effects ◽  
The U.S

In recent years there has been a lot of discussion about U.S. budget deficits. Many economists and other observers have viewed these deficits as harmful to the U.S. and world economies. The supposed harmful effects include high real interest rates, low saving, low rates of economic growth, large current-account deficits in the United States and other countries with large budget deficits, and either a high or low dollar (depending apparently on the time period). This crisis scenario has been hard to maintain along with the robust performance of the U.S. economy since late 1982. Persistent budget deficits have increased economists' interest in theories and evidence about fiscal policy. At the same time, the conflict between standard predictions and actual outcomes in the U.S. economy has, I think, increased economists' willingness to consider approaches that depart from the standard paradigm. In this paper, I will focus on the alternative theory that is associated with the name of David Ricardo.

scholarly journals The Impact of Intergenerational Mobility on Msa Growth in the United States

2020 ◽  
Vol 15 (1) ◽  
pp. 127-141
Author(s):  
Mauro Joseph
Keyword(s):  
United States ◽  
Intergenerational Mobility ◽  
Negative Relationship ◽  
The United States ◽  
Income Mobility ◽  
Absolute Income ◽  
Time Period ◽  
Two Measures ◽  
The Impact ◽  
The Relationship

AbstractThis paper explores the relationship between economic growth and intergenerational mobility in the United States. Data from metropolitan statistical areas in the U.S. is used to examine how two measures of intergenerational mobility impact growth rates. More precisely, I examine how absolute income mobility and relative income mobility are related the growth rate of real gross metropolitan product (RGMP) from 2001 to 2011. I find that absolute mobility has a positive relationship with RGMP growth over the time period, and that relative mobility exhibits a negative relationship with RGMP. Results are found to be robust to two stage least squares estimation.

scholarly journals Does High Yield Spread Dampen Economic Growth?

2014 ◽  
Vol 3 (2) ◽  
pp. 01-09
Author(s):  
Yutaka Kurihara
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Interest Rates ◽  
Empirical Relationship ◽  
Negative Relationship ◽  
The United States ◽  
Output Growth ◽  
Yield Spread ◽  
Government Bond ◽  
Bond Yield

This article focuses on the empirical relationship between the United States’ and Japan’s yield spread of interest rates and economic growth in Japan. The yield spread is defined in this article as the difference between the Japanese government bond yield minus the US government bond yield. Some studies have tackled this issue and found a negative relationship between the yield spread and economic growth; however, recent studies have shown no or a weak relationship. This problem has not yet reached consensus in spite of its importance. As the Japanese interest rate has been quite low since the adoption of the zero interest rate policy at the end of 1990s, the situation may change the results. The empirical results show that reliability of yield spread as a leading indicator of output growth exists in Japan; however, term structure of interest rate is not related to output growth.

scholarly journals Impact of the collapse of the Lehman Brothers bank and the 2008 financial crisis on global economic security

2019 ◽  
Vol 191 (1) ◽  
pp. 149-158
Author(s):  
Radoslaw Mieszala
Keyword(s):  
Financial Crisis ◽  
Global Economy ◽  
Stock Exchange ◽  
The United States ◽  
Economic Security ◽  
Mortgage Loans ◽  
The Us ◽  
Lehman Brothers ◽  
The 2008 Financial Crisis ◽  
A Chain

The study presents the analysis of the economic phenomena that occurred at the turn of 2007/2008. The financial meltdown and stagnation – a slowdown in the growth of world economies, which led to a chain of bankruptcies and debts, took place in those years. Due to the domino effect, the Lehman Brothers activity had an impact on the global economy. The bank declared bankruptcy on September 15, 2008, which caused panic on the US stock exchange and a greater conviction about the crisis of high-risk mortgage loans. The result was multifaceted activities implementing proper corporate governance and deliberalization of financial law in the United States. The collapse of the colossus achieving record profits was, therefore, a kind of breakthrough that triggered a financial crisis that spread throughout the world. The State Treasury and the US Federal Reserve System joined the rescue of the company; nevertheless, negotiations with potential investors ended in a fiasco.

scholarly journals Measuring the impact of COVID-19 surveillance variables over the international oil market

2022 ◽  
Vol 9 (1) ◽  
pp. 27-33
Author(s):  
Alshdadi et al. ◽  
Keyword(s):  
Saudi Arabia ◽  
Crude Oil ◽  
Global Economy ◽  
Oil Prices ◽  
Oil Reserves ◽  
Oil Market ◽  
Crude Oil Prices ◽  
Oil Markets ◽  
Long Term Impact ◽  
The Impact

Coronavirus (COVID-19) has turned to be an alarm for the whole world both in terms of health and economics. It is striking the global economy and increasing the unpredictability of the financial market in several ways. Significantly, the pandemic spread stimulated the social distancing which led to the lockdown of the countries’ businesses, financial markets, and daily life events. International oil markets have accommodated the crude oil prices during the early COVID-19 period. However, after the first 50 days, Saudi Arabia has surged the market with oil, which caused a certain decrease in crude oil prices, internationally. Saudi Arabia is one of the biggest oil reserves in the world. International trade is based on oil reservoirs which in turn, have been significantly dislodged by the pandemic. Therefore, it is crucial to study the impact of COVID-19 on the international oil market. The purpose of this study is to investigate the short-term and long-term impact of COVID-19 on the international oil market. The daily crude oil price data is used to analyze the impact of daily price fluctuation over COVID-19 surveillance variables. The correlation between surveillance variables and international crude oil prices is calculated and analyzed. Consequently, the project will help in stabilizing the expected world economic crises and particularly will provide the implications for the policymakers in the oil market.

scholarly journals Booms, Busts, and Divorce

2011 ◽  
Vol 11 (1) ◽  
Author(s):  
Judith K Hellerstein ◽  
Melinda Sandler Morrill
Keyword(s):  
Negative Relationship ◽  
Divorce Rate ◽  
State Level ◽  
The United States ◽  
Vital Statistics ◽  
Macroeconomic Shocks ◽  
Macroeconomic Conditions ◽  
Time Period ◽  
Alternative Measures ◽  
Divorce Rates

Abstract For almost a century, anecdotes have suggested that divorce rates decline during recessions. However, until very recently there has been surprisingly little formal empirical evidence on whether such a link exists, let alone its magnitude if it does. Moreover, the anticipated direction of the effect is ambiguous theoretically. Although previous studies have concluded that individual job loss destabilizes marriages, macroeconomic conditions may affect divorce probabilities even for those not directly experiencing a job shock. We add to the few existing contemporaneous studies of the effects of macroeconomic shocks on divorce by conducting an empirical analysis of the relationship between state-level unemployment rates and state-level divorce rates using vital statistics data on divorces in the United States from 1976-2009. We find a significant and robust negative relationship between the unemployment and divorce rates, whereby a one percentage point rise in the unemployment rate is associated with a decrease of 0.043 divorces per one thousand people, or about a one percent fall in the divorce rate. The result that divorce is pro-cyclical is robust to a host of alternative empirical specifications, to disaggregating by state characteristics and time period, to expanding the unemployment series back to 1970, and to using alternative measures of local economic conditions.

Does the Fed Impact Stock Prices?

2019 ◽  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Stock Prices ◽  
Positive Relationship ◽  
Negative Impact ◽  
Negative Relationship ◽  
Fair Value ◽  
Equity Returns ◽  
Equity Prices ◽  
The Us

The influence of the Fed’s actions on equity prices has been a source of significant speculation in recent years. This article uses a well-regarded measure for the “fair” value of interest rates to measure the degree to which the Fed is influencing interest rate and then relates that level of interference to equity returns. We find that Fed’s actions are correlated with a modest negative impact on US equity prices—that is Fed interference has a slight negative relationship with broader equity returns. In contrast, outside the US, Central Bank interference generally has a stronger positive relationship to equity returns.

scholarly journals The global financial crisis: Implications for capital to agribusiness

2012 ◽  
Vol 6 (1-2) ◽  
pp. 59-62
Author(s):  
Bruce L. Ahrendsen
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Global Economy ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
The United States ◽  
The European Union ◽  
Financial Obligations ◽  
General Business ◽  
The Global Financial Crisis

The global economy has continued to experience lingering effects of the global financial crisis that began in 2007. Although attention was initially given to the liquidity crisis and survival of some the world’s largest corporations and institutions, the financial crisis is likely to have long-lasting implications for agribusiness. As the world slowly recovers from the crisis, another round of problems are emerging as governments and international institutions attempt to unwind the positions they took in an effort to prevent the global economic bubble from bursting. Perhaps the most problematic factor for businesses is access to capital in sufficient amounts and at affordable rates. Governments and institutions, particularly in the United States (U.S.) and the European Union, have increased their financial obligations as the result of activities taken to curtail the economic crisis. These financial obligations and the associated financial risks place pressure on financial markets and tend to restrain the availability of capital and increase the cost of capital for businesses. However, the U.S. agricultural credit market has not experienced problems to the same extent as general business (commercial and industrial) and real estate credit markets have. In general, U.S. farm businesses have a strong balance sheet, adequate repayment capacity, sufficient amount of assets to offer collateral for loans, and reasonable profits. Thus, U.S. farm businesses have had an ample supply of credit at relatively low interest rates.

scholarly journals Don't End or Audit the Fed: Central Bank Independence in an Age of Austerity

2018 ◽  
Author(s):  
Neil H. Buchanan ◽  
Michael C. Dorf
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Federal Reserve ◽  
Political Influence ◽  
The United States ◽  
Political Actors ◽  
Debt Ceiling ◽  
Market Driven ◽  
The 2008 Financial Crisis

102 Cornell Law Review (2016)The Federal Reserve (the Fed) is the central bank of the United States. Because of its power and importance in guiding the economy, the Fed's independence from direct political influence has made it a target of ideologically motivated attacks throughout its history, with an especially aggressive round of attacks coming in the wake of the 2008 financial crisis and ongoing today. We defend Fed independence. We point to the Fed's exemplary performance during and after the 2008 crisis, and we offer the example of a potential future crisis in which Congress falls to increase the debt ceiling to show how the Fed's independence makes it the only entity that can minimize the damage during crises (both market-driven and policy-induced). We further argue that the Fed's independence is justified to prevent self-dealing by politicians, even when no crisis is imminent. Although the classic justification for Fed independence focuses on the risk that political actors will keep interest rates lower than appropriate for the long-term health of the economy, we show that Fed independence addresses the risk of self-dealing and other pathologies even when, as now, political actors favor tighter monetary policy than appropriate for the long-term health of the economy.

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