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The impact of monetary policy on oil process parameters and market expectations

  • Askari, Hossein
  • Krichene, Noureddine

Following record low interest rates and a depreciating US dollar, crude oil prices came under increasing pressure during the period 2003M5-2007M10. Oil price process parameters changed dramatically toward consistently rising prices. Short-term forecasting implied the persistence of the observed trend, as market fundamentals and underlying monetary policy were supportive of these trends. Market expectations derived from option prices anticipated further surge in oil prices and indicated a significant probability of right tail events. A tightening of monetary policy may be essential for restoring stability to oil markets and in turn for sustained economic growth.

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File URL: http://www.sciencedirect.com/science/article/B6W4F-50F8BVV-4/2/4acc0b8978b4f203cd75775561b39513
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Article provided by Elsevier in its journal Global Finance Journal.

Volume (Year): 21 (2010)
Issue (Month): 2 ()
Pages: 186-200

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Handle: RePEc:eee:glofin:v:21:y:2010:i:2:p:186-200
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620162

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  1. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
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  6. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
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