Did Easy Money in the Dollar Bloc Fuel the Oil Price Run-Up?
Among the various explanations for the run-up in oil prices that occurred through mid-2008, one story focuses on the role of monetary policy in the United States and in developing economies. In this view, developing countries that peg their currencies to the dollar were forced to ease their monetary policies in response to reductions in U.S. interest rates, leading to economic overheating and higher oil prices. We assess that hypothesis using simulations of SIGMA, a multi-country DSGE model. Even when the currencies of many developing countries are pegged to the dollar rigidly, an easing of U.S. monetary policy leads to only a transitory run-up in oil prices. Instead, strong economic growth in many developing economies, as well as shortfalls in oil production, better explain the sustained run-up in oil prices observed between 2004 and 2008.
When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2011:q:1:a:6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timo Laurmaa)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.