A Simultaneous Equation Model for World Crude Oil and Natural Gas Markets
AbstractA model for world crude oil and natural gas markets is estimated. It confirms low price and high income elasticities of demand for both crude oil and natural gas, which explains the market power of oil producers and price volatility following shocks. The paper establishes a relationship between oil prices, changes in the nominal effective exchange rate (NEER) of the U.S. dollar, and the U.S. interest rates, thereby identifying demand shocks arising from monetary policy. Both interest rates and the NEER are shown to influence crude prices inversely. The results imply that crude oil prices should be included in the policy rule equation of an inflation targeting model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 05/32.
Date of creation: 01 Feb 2005
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-22 (All new papers)
- NEP-ENE-2005-10-22 (Energy Economics)
- NEP-FIN-2005-10-22 (Finance)
- NEP-MAC-2005-10-22 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, Econometric Society, vol. 44(1), pages 43-52, January.
- Rice, Patricia & Smith, V. Kerry, 1977. "An econometric model of the petroleum industry," Journal of Econometrics, Elsevier, Elsevier, vol. 6(3), pages 263-287, November.
- Ramsey, J B & Rasche, R & Allen, Bruce T, 1975. "An Analysis of the Private and Commercial Demand for Gasoline," The Review of Economics and Statistics, MIT Press, vol. 57(4), pages 502-07, November.
- Bentzen, Jan & Engsted, Tom, 1993. "Short- and long-run elasticities in energy demand : A cointegration approach," Energy Economics, Elsevier, Elsevier, vol. 15(1), pages 9-16, January.
- Robert S. Pindyck, 1979. "The Structure of World Energy Demand," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262661772, December.
- Patricio Jaramillo & Sergio Lehmann & David Moreno., 2009. "China, Precios de Commodities y Desempeño de América Latina: Algunos Hechos Estilizados," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(133), pages 67-105.
- Nikolay Aleksandrov & Raphael Espinoza, 2011. "Optimal Oil Extraction as a multiple Real Option," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 064, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
- Noureddine Krichene, 2008. "Crude Oil Prices," IMF Working Papers, International Monetary Fund 08/133, International Monetary Fund.
- Ding, Liang & Vo, Minh, 2012. "Exchange rates and oil prices: A multivariate stochastic volatility analysis," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 52(1), pages 15-37.
- Sabit Bagirov & Leonid Grigoriev & Wojciech Paczynski & Vladimer Papava & Marcel Salikhov & Michael Tokmazishvili, 2009. "Energy Trade and Cooperation Between the EU and CIS Countries," CASE Network Reports, CASE-Center for Social and Economic Research 0083, CASE-Center for Social and Economic Research.
- Wu, Chih-Chiang & Chung, Huimin & Chang, Yu-Hsien, 2012. "The economic value of co-movement between oil price and exchange rate using copula-based GARCH models," Energy Economics, Elsevier, Elsevier, vol. 34(1), pages 270-282.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.