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Oil prices and the impact of the financial crisis of 2007–2009

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  • Bhar, Ramaprasad
  • Malliaris, A.G.

Abstract

Oil prices increased dramatically during 2004–2006. Industry experts initially attributed these price increases to fundamental factors such as the rise in global demand, but also because of disruptions in the supply of oil. The price increases however were so substantial that additional factors are needed to explain such dramatic changes. We propose that the decline in the value of the U.S. dollar measured both by the appreciation of the Euro and of gold prices, played an important role as oil suppliers demanded compensation for the declining value of the dollar. Using a Markov switching regime methodology we find evidence that this hypothesis is true prior to the financial crisis, but its validity does not hold after the crisis when oil prices crashed and the dollar rallied.

Suggested Citation

  • Bhar, Ramaprasad & Malliaris, A.G., 2011. "Oil prices and the impact of the financial crisis of 2007–2009," Energy Economics, Elsevier, vol. 33(6), pages 1049-1054.
    • Handle: RePEc:eee:eneeco:v:33:y:2011:i:6:p:1049-1054
    DOI: 10.1016/j.eneco.2011.01.016
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    References listed on IDEAS

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    More about this item

    Keywords

    Oil prices; Euro; Gold; Time series analysis; Markov switching regimes;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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