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Oil prices and the macroeconomy reconsideration for Germany: Using continuous wavelet

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  • Tiwari, Aviral Kumar

Abstract

The cross wavelet analysis is used in the study to decompose the time–frequency effects of oil price changes on the German macroeconomy. We argue that the relationship between oil prices and industrial production is ambiguous. Our results show that there are both phase and anti-phase relationships between oil price returns and inflation and in most of the cases inflation is the leading variable. Additional evidence shows that there is a huge inconsistency between the phase-difference of the return series of oil price and industrial production at the 12–16month frequency bands but at the 16–24month frequency bands, we find that oil price changes that have occurred during 1982–2009 were demand-driven. In a nutshell our results suggest that oil price changes that have occurred after 1994 were demand-driven and the volatility of the inflation rate started to decrease after the 1990s but the volatility of the industrial output growth rate started to decrease after the 2000s.

Suggested Citation

  • Tiwari, Aviral Kumar, 2013. "Oil prices and the macroeconomy reconsideration for Germany: Using continuous wavelet," Economic Modelling, Elsevier, vol. 30(C), pages 636-642.
  • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:636-642
    DOI: 10.1016/j.econmod.2012.11.003
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    References listed on IDEAS

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    1. 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.
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    More about this item

    Keywords

    Business cycles; Oil shocks; Wavelets; Cross wavelets; Wavelet coherency;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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