The impact of monetary policy on oil process parameters and market expectations
AbstractFollowing record low interest rates and a depreciating US dollar, crude oil prices came under increasing pressure during the period 2003M5-2007M10. Oil price process parameters changed dramatically toward consistently rising prices. Short-term forecasting implied the persistence of the observed trend, as market fundamentals and underlying monetary policy were supportive of these trends. Market expectations derived from option prices anticipated further surge in oil prices and indicated a significant probability of right tail events. A tightening of monetary policy may be essential for restoring stability to oil markets and in turn for sustained economic growth.
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Bibliographic InfoArticle provided by Elsevier in its journal Global Finance Journal.
Volume (Year): 21 (2010)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/620162
Crude oil prices Esscher transform Inverse problem Normal inverse Gaussian Monetary policy;
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