Cyclical behaviour and shock-persistence: crude oil prices
AbstractOil prices behave differently over different time-horizons. For the short run, we examine the pattern of movements in crude oil prices over business cycles and test whether price increases influence global output and/or are influenced by economic cycles. For the long run, we focus on whether "shocks" to crude oil prices are persistent or not. Our findings indicate that the price of crude oil exhibits substantial cyclical behaviour, as verified by several tests carried out in this paper. The VAR analysis indicates that the price of oil is a pro-cyclical variable. Moreover, the results show that, while, during the 1972-2003 period (when OPEC exerted more influence in the oil market), the oil market experienced substantial fluctuations in price, the price cycles were mean-reverting and not shock-persistent. This could indicate that OPEC market power can have stabilising effects. Copyright 2004 Organization of the Petroleum Exporting Countries.
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Bibliographic InfoArticle provided by Organization of the Petroleum Exporting Countries in its journal OPEC Review.
Volume (Year): 28 (2004)
Issue (Month): 2 (06)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/%28ISSN%291753-0237
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- Jose Noguera & Rowena A. Pecchenino, 2005. "Can a Cartel Fuel the Engine of Economic Development? OPEC and the macroeconomics of oil," CERGE-EI Working Papers wp280, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
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