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Oil price shocks and global imbalances: Lessons from a model with trade and financial interdependencies

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  • Jean-Pierre Allegret
  • Valérie Mignon
  • Audrey Sallenave

Abstract

The aim of this paper is to investigate oil price shocks’ effects and their associated transmission channels on global imbalances. To this end, we rely on a Global VAR approach that allows us to account for trade and financial interdependencies between countries. Considering a sample of 30 oil-exporting and importing economies over the 1980-2011 period, we show that the nature of the shock—demand-driven or supply-driven—matters in understanding the effects of oil price shocks on global imbalances. In addition, we evidence that the main adjustment mechanism to oil shocks is based on the trade channel, the valuation channel being at play only on the short run.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2014-01.

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Date of creation: Jan 2014
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Handle: RePEc:cii:cepidt:2014-01

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Keywords: oil prices; global imbalances; global VAR;

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