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Re-examining the dynamic causal oil-macroeconomy relationship

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  • Hammoudeh, Shawkat
  • Bhar, Ramaprasad
  • Thompson, Mark A.

Abstract

We investigate the cyclical component dynamics of US macroeconomic variables and oil benchmark prices in a regime-switching environment. We compare two different oil benchmark cycles, and the results indicate that WTI and Brent are not perfect substitutes in the US economy when it comes to dynamic causal oil-macroeconomic relationships. The results provide valuable information to policymakers regarding the impacts of major oil prices on different macroeconomic variables and their interrelations among the macroeconomic variables.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 19 (2010)
Issue (Month): 4 (September)
Pages: 298-305

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Handle: RePEc:eee:finana:v:19:y:2010:i:4:p:298-305

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Web page: http://www.elsevier.com/locate/inca/620166

Related research

Keywords: Decomposition Cycles Trends Regimes Oil and macroeconomy;

References

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  1. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-44, June.
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  6. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
  7. Shawkat M. Hammoudeh & Bradley T. Ewing & Mark A. Thompson, 2008. "Threshold Cointegration Analysis of Crude Oil Benchmarks," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 79-96.
  8. Christiansen, Charlotte, 2008. "Level-ARCH short rate models with regime switching: Bivariate modeling of US and European short rates," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 925-948, December.
  9. Malik, Farooq & Ewing, Bradley T., 2009. "Volatility transmission between oil prices and equity sector returns," International Review of Financial Analysis, Elsevier, vol. 18(3), pages 95-100, June.
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  12. Ewing, Bradley T., 2003. "The response of the default risk premium to macroeconomic shocks," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(2), pages 261-272.
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  14. Yang, Hao-Yen, 2000. "A note on the causal relationship between energy and GDP in Taiwan," Energy Economics, Elsevier, vol. 22(3), pages 309-317, June.
  15. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
  16. Andrew Ang & Geert Bekaert, 1998. "Regime Switches in Interest Rates," NBER Working Papers 6508, National Bureau of Economic Research, Inc.
  17. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
  18. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, December.
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  22. Carol Alexander & Anca Dimitriu, 2005. "Detecting Switching Strategies in Equity Hedge Funds," ICMA Centre Discussion Papers in Finance icma-dp2005-07, Henley Business School, Reading University.
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Cited by:
  1. Hatice Gaye GENCER & Erdem KILIC, 2014. "Conditional Correlations and Volatility Links Among Gold, Oil and Istanbul Stock Exchange Sector Returns," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 170-182.

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