IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v79y2012i1p47-58.html
   My bibliography  Save this article

Cyclical behavior of crude oil markets and economic recessions in the period 1986–2010

Author

Listed:
  • Alvarez-Ramirez, Jose
  • Rodriguez, Eduardo
  • Martina, Esteban
  • Ibarra-Valdez, Carlos

Abstract

For at least one century, crude oil has been one of the most important commodities for the worldwide economic activity. Important technological innovations, including chemical transformation processes and transportation systems, have been based on the availability or not of crude oil. In this way, a close understanding of the crude oil market dynamics should provide insights in important aspects related to potential directions of technological change for both improving crude oil transformation efficiency and substitution by alternative energy sources. This paper studies the dynamics of the crude oil price for the period from 1986 to 2010. To this end, the entropy time-asymmetry is computed along the price trajectory. Empirical results indicated the presence of a non-regular cyclical behavior with a dominant period of about 4.5years. Some evidences pointing toward a comovement of entropy time-asymmetry peaks with major US economic recessions are found, suggesting a tight relationship between macroeconomy and crude oil prices. The results are discussed in terms of the major economic events that occurred in the upward and downward cycle periods and potential implications for the design of energy policies.

Suggested Citation

  • Alvarez-Ramirez, Jose & Rodriguez, Eduardo & Martina, Esteban & Ibarra-Valdez, Carlos, 2012. "Cyclical behavior of crude oil markets and economic recessions in the period 1986–2010," Technological Forecasting and Social Change, Elsevier, vol. 79(1), pages 47-58.
    • Handle: RePEc:eee:tefoso:v:79:y:2012:i:1:p:47-58
    DOI: 10.1016/j.techfore.2011.04.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162511000965
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2011.04.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    2. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-236, April.
    3. Robert B. Barsky & Lutz Kilian, 2004. "Oil and the Macroeconomy Since the 1970s," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 115-134, Fall.
    4. Scherer, F. M., 2011. "Standard Oil as a Technological Innovator," Working Paper Series rwp11-008, Harvard University, John F. Kennedy School of Government.
    5. Gisser, Micha & Goodwin, Thomas H, 1986. "Crude Oil and the Macroeconomy: Tests of Some Popular Notions: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 95-103, February.
    6. Rotemberg, Julio J & Woodford, Michael, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 550-577, November.
    7. de Castro, Carlos & Miguel, Luis Javier & Mediavilla, Margarita, 2009. "The role of non conventional oil in the attenuation of peak oil," Energy Policy, Elsevier, vol. 37(5), pages 1825-1833, May.
    8. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
    9. McKay, Alisdair & Reis, Ricardo, 2008. "The brevity and violence of contractions and expansions," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 738-751, May.
    10. 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.
    11. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
    12. Kesicki, Fabian, 2010. "The third oil price surge - What's different this time?," Energy Policy, Elsevier, vol. 38(3), pages 1596-1606, March.
    13. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
    14. Cunado, Juncal & Perez de Gracia, Fernando, 2003. "Do oil price shocks matter? Evidence for some European countries," Energy Economics, Elsevier, vol. 25(2), pages 137-154, March.
    15. F. Scherer, 2011. "Standard Oil as a Technological Innovator," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(3), pages 225-233, May.
    16. Marc Gronwald, 2008. "Large Oil Shocks and the US Economy: Infrequent Incidents with Large Effects," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 151-172.
    17. Bwo-Nung Huang, 2008. "Factors Affecting an Economy's Tolerance and Delay of Response to the Impact of a Positive Oil Price Shock," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-34.
    18. Michael Bruno & Jeffrey Sachs, 1982. "Input Price Shocks and the Slowdown in Economic Growth: The Case of U.K.Manufacturing," NBER Working Papers 0851, National Bureau of Economic Research, Inc.
    19. 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 740-744, June.
    20. Coccia, Mario, 2010. "Energy metrics for driving competitiveness of countries: Energy weakness magnitude, GDP per barrel and barrels per capita," Energy Policy, Elsevier, vol. 38(3), pages 1330-1339, March.
    21. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    22. Rebeca Jimenez-Rodriguez & Marcelo Sanchez, 2005. "Oil price shocks and real GDP growth: empirical evidence for some OECD countries," Applied Economics, Taylor & Francis Journals, vol. 37(2), pages 201-228.
    23. Alan A. Carruth & Mark A. Hooker & Andrew J. Oswald, 1998. "Unemployment Equilibria And Input Prices: Theory And Evidence From The United States," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 621-628, November.
    24. Gallagher, Brian, 2011. "Peak oil analyzed with a logistic function and idealized Hubbert curve," Energy Policy, Elsevier, vol. 39(2), pages 790-802, February.
    25. Michael Bruno & Jeffrey Sachs, 1982. "Input Price Shocks and the Slowdown in Economic Growth: The Case of U.K. Manufacturing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(5), pages 679-705.
    26. Oladosu, Gbadebo, 2009. "Identifying the oil price-macroeconomy relationship: An empirical mode decomposition analysis of US data," Energy Policy, Elsevier, vol. 37(12), pages 5417-5426, December.
    27. Ewing, Bradley T. & Thompson, Mark A., 2007. "Dynamic cyclical comovements of oil prices with industrial production, consumer prices, unemployment, and stock prices," Energy Policy, Elsevier, vol. 35(11), pages 5535-5540, November.
    28. Curtis, Fred, 2009. "Peak globalization: Climate change, oil depletion and global trade," Ecological Economics, Elsevier, vol. 69(2), pages 427-434, December.
    29. Scherer, Frederic Michael, 2011. "Standard Oil as a Technological Innovator," Scholarly Articles 4686409, Harvard Kennedy School of Government.
    30. Sadorsky, Perry, 2006. "Modeling and forecasting petroleum futures volatility," Energy Economics, Elsevier, vol. 28(4), pages 467-488, July.
    31. Prachowny,Martin F. J., 1986. "Money in the Macroeconomy," Cambridge Books, Cambridge University Press, number 9780521315944.
    32. Robert H. Rasche & John A. Tatom, 1977. "Energy resources and potential GNP," Review, Federal Reserve Bank of St. Louis, vol. 59(Jun), pages 10-24.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kaijian He & Rui Zha & Jun Wu & Kin Keung Lai, 2016. "Multivariate EMD-Based Modeling and Forecasting of Crude Oil Price," Sustainability, MDPI, vol. 8(4), pages 1-11, April.
    2. Joseph P Byrne & Ryuta Sakemoto & Bing Xu, 2020. "Commodity price co-movement: heterogeneity and the time-varying impact of fundamentals [Oil price shocks and the stock market: evidence from Japan]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 47(2), pages 499-528.
    3. Antonio García-Amate & Alicia Ramírez-Orellana & Mª José Muñoz-Torrecillas, 2018. "Economic Consequences Of Peak Oil For The Major Multinational Oil And Gas Companies," Eurasian Journal of Business and Management, Eurasian Publications, vol. 6(1), pages 23-41.
    4. Fileccia, Gaetano & Sgarra, Carlo, 2018. "A particle filtering approach to oil futures price calibration and forecasting," Journal of Commodity Markets, Elsevier, vol. 9(C), pages 21-34.
    5. Zhaojie Luo & Xiaojing Cai & Katsuyuki Tanaka & Tetsuya Takiguchi & Takuji Kinkyo & Shigeyuki Hamori, 2019. "Can We Forecast Daily Oil Futures Prices? Experimental Evidence from Convolutional Neural Networks," JRFM, MDPI, vol. 12(1), pages 1-13, January.
    6. Fan, Liwei & Pan, Sijia & Li, Zimin & Li, Huiping, 2016. "An ICA-based support vector regression scheme for forecasting crude oil prices," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 245-253.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ortiz-Cruz, Alejandro & Rodriguez, Eduardo & Ibarra-Valdez, Carlos & Alvarez-Ramirez, Jose, 2012. "Efficiency of crude oil markets: Evidences from informational entropy analysis," Energy Policy, Elsevier, vol. 41(C), pages 365-373.
    2. Martina, Esteban & Rodriguez, Eduardo & Escarela-Perez, Rafael & Alvarez-Ramirez, Jose, 2011. "Multiscale entropy analysis of crude oil price dynamics," Energy Economics, Elsevier, vol. 33(5), pages 936-947, September.
    3. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    4. Dong Kim, 2012. "What is an oil shock? Panel data evidence," Empirical Economics, Springer, vol. 43(1), pages 121-143, August.
    5. Sugra Ingilab Humbatova & Natig Qadim-Oglu Hajiyev, 2019. "Oil Factor in Economic Development," Energies, MDPI, vol. 12(8), pages 1-40, April.
    6. Oladosu, Gbadebo, 2009. "Identifying the oil price-macroeconomy relationship: An empirical mode decomposition analysis of US data," Energy Policy, Elsevier, vol. 37(12), pages 5417-5426, December.
    7. Lizardo, Radhamés A. & Mollick, André V., 2010. "Oil price fluctuations and U.S. dollar exchange rates," Energy Economics, Elsevier, vol. 32(2), pages 399-408, March.
    8. Jaime Casassus & Freddy Higuera, 2011. "Stock Return Predictability and Oil Prices," Documentos de Trabajo 406, Instituto de Economia. Pontificia Universidad Católica de Chile..
    9. Munechika Katayama, 2013. "Declining Effects of Oil Price Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 977-1016, September.
    10. Ana Gómez-Loscos & Mar𨀠 Dolores Gadea & Antonio Montañ鳠, 2012. "Economic growth, inflation and oil shocks: are the 1970s coming back?," Applied Economics, Taylor & Francis Journals, vol. 44(35), pages 4575-4589, December.
    11. Ju, Keyi & Su, Bin & Zhou, Dequn & Wu, Junmin & Liu, Lifan, 2016. "Macroeconomic performance of oil price shocks: Outlier evidence from nineteen major oil-related countries/regions," Energy Economics, Elsevier, vol. 60(C), pages 325-332.
    12. Du, Limin & Yanan, He & Wei, Chu, 2010. "The relationship between oil price shocks and China's macro-economy: An empirical analysis," Energy Policy, Elsevier, vol. 38(8), pages 4142-4151, August.
    13. Naser, Hanan, 2014. "On the cointegration and causality between Oil market, Nuclear Energy Consumption, and Economic Growth: Evidence from Developed Countries," MPRA Paper 65252, University Library of Munich, Germany, revised 25 Mar 2015.
    14. Rajesh H. Acharya & Anver C. Sadath, 2018. "Revisiting the relationship between oil price and macro economy: Evidence from India," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2018(1), pages 173-190.
    15. James D. Hamilton, 2013. "Oil prices, exhaustible resources and economic growth," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 1, pages 29-63, Edward Elgar Publishing.
    16. van de Ven, Dirk Jan & Fouquet, Roger, 2017. "Historical energy price shocks and their changing effects on the economy," Energy Economics, Elsevier, vol. 62(C), pages 204-216.
    17. Awerbuch, Shimon & Sauter, Raphael, 2006. "Exploiting the oil-GDP effect to support renewables deployment," Energy Policy, Elsevier, vol. 34(17), pages 2805-2819, November.
    18. Filis, George & Degiannakis, Stavros & Floros, Christos, 2011. "Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 152-164, June.
    19. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Liquidity and crude oil prices: China's influence over 1996–2011," Economic Modelling, Elsevier, vol. 33(C), pages 517-525.
    20. Christiane Baumeister & Gert Peersman, 2013. "Time-Varying Effects of Oil Supply Shocks on the US Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 1-28, October.

    More about this item

    Keywords

    Crude oil; 4.5-year cycles; Recessions;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:79:y:2012:i:1:p:47-58. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.