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Monetary Effects on Oil and Gold Prices

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Author Info
Gillman, Max () (Cardiff Business School)
Nakov, Anton

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Abstract

The paper presents a theory of nominal asset prices for competitively owned oil and gold. Focusing on monetary effects, with flexible prices, oil and gold prices follow the aggregate price. But with rigid nominal prices for oil and gold, prices can jump proportionally with nominal interest rate increases. VAR evidence indicates structural breaks in the oil and gold prices that are used to illustrate the theory of price jumps. This evidence also indicates Granger causality of the oil and gold prices by inflation or nominal interest rates, not inconsistent with the theory.

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File URL: http://www.cardiff.ac.uk/carbs/econ/workingpapers/papers/E2008_15.pdf
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Publisher Info
Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/15.

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Length: 32 pages
Date of creation: Jul 2008
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Handle: RePEc:cdf:wpaper:2008/15

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Related research
Keywords: oil prices ination structural breaks cash-in-advance VAR system

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

References listed on IDEAS
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    Other versions:
  2. Robert Barsky & Lutz Kilian, 2004. "Oil and the Macroeconomy Since the 1970s," NBER Working Papers 10855, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Gillman, Max & Kejak, Michal, 2005. "Inflation and Balanced-Path Growth with Alternative Payment Mechanisms," Cardiff Economics Working Papers E2005/15, Cardiff University, Cardiff Business School, Economics Section. [Downloadable!]
    Other versions:
  4. Sergio Rebelo, 2005. "Real Business Cycle Models: Past, Present and Future," Scandinavian Journal of Economics, Blackwell Publishing, vol. 107(2), pages 217-238, 06. [Downloadable!] (restricted)
    Other versions:
  5. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," NBER Working Papers 5893, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
    Other versions:
  7. Szilárd Benk & Max Gillman & Michal Kejak, 2006. " Money Velocity in an Endogenous Growth Business Cycle with Credit Shocks," CDMA Conference Paper Series 0604, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
    Other versions:
  8. 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. [Downloadable!] (restricted)
  9. Ohanian, Lee E., 1988. "The spurious effects of unit roots on vector autoregressions : A Monte Carlo study," Journal of Econometrics, Elsevier, vol. 39(3), pages 251-266, November. [Downloadable!] (restricted)
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  11. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-38, June. [Downloadable!] (restricted)
    Other versions:
  12. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321. [Downloadable!] (restricted)
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