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Cyclical behaviour and shock-persistence: crude oil prices

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  • Ahmad R. Jalali-Naini
  • Mehdi Asali

Abstract

Oil prices behave differently over different time-horizons. For the short run, we examine the pattern of movements in crude oil prices over business cycles and test whether price increases influence global output and/or are influenced by economic cycles. For the long run, we focus on whether "shocks" to crude oil prices are persistent or not. Our findings indicate that the price of crude oil exhibits substantial cyclical behaviour, as verified by several tests carried out in this paper. The VAR analysis indicates that the price of oil is a pro-cyclical variable. Moreover, the results show that, while, during the 1972-2003 period (when OPEC exerted more influence in the oil market), the oil market experienced substantial fluctuations in price, the price cycles were mean-reverting and not shock-persistent. This could indicate that OPEC market power can have stabilising effects. Copyright 2004 Organization of the Petroleum Exporting Countries.

Suggested Citation

  • Ahmad R. Jalali-Naini & Mehdi Asali, 2004. "Cyclical behaviour and shock-persistence: crude oil prices," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 28(2), pages 107-131, June.
  • Handle: RePEc:bla:opecrv:v:28:y:2004:i:2:p:107-131
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    Cited by:

    1. Maslyuk, Svetlana & Smyth, Russell, 2008. "Unit root properties of crude oil spot and futures prices," Energy Policy, Elsevier, vol. 36(7), pages 2591-2600, July.
    2. Juan Carlos Cuestas & Paulo Jose Regis, 2008. "Nonlinearities and the order of integration of oil prices," Working Papers 2008/15, Nottingham Trent University, Nottingham Business School, Economics Division.
    3. Jose Noguera & Rowena A. Pecchenino, 2005. "Can a Cartel Fuel the Engine of Economic Development? OPEC and the macroeconomics of oil," CERGE-EI Working Papers wp280, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Noguera, Jose & Pecchecnino, Rowena A., 2007. "OPEC and the international oil market: Can a cartel fuel the engine of economic development?," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 187-199, February.
    5. Ozdemir, Zeynel Abidin & Gokmenoglu, Korhan & Ekinci, Cagdas, 2013. "Persistence in crude oil spot and futures prices," Energy, Elsevier, vol. 59(C), pages 29-37.
    6. Gil-Alana, Luis A. & Yaya, OlaOluwa S., 2014. "The relationship between oil prices and the Nigerian stock market. An analysis based on fractional integration and cointegration," Energy Economics, Elsevier, vol. 46(C), pages 328-333.

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