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The Macroeconomic Effects of Higher Oil Prices

Author

Listed:
  • Benjamin Hunt
  • Peter Isard
  • Douglas Laxton

    (Research Department, International Monetary Fund)

Abstract

The paper uses MULTIMOD to analyse the macroeconomic effects of oil price shocks, distinguishing between temporary, more persistent, and permanent shocks. It provides perspectives on several findings in the literature and the key role of monetary policy in influencing macroeconomic outcomes. Specific attention is paid to the channels through which oil price increases can pass through into core inflation, the implications of delayed policy responses, and the relative merits of leaning in different directions when the correct policy response is uncertain.

Suggested Citation

  • Benjamin Hunt & Peter Isard & Douglas Laxton, 2002. "The Macroeconomic Effects of Higher Oil Prices," National Institute Economic Review, National Institute of Economic and Social Research, vol. 179(1), pages 87-103, January.
  • Handle: RePEc:sae:niesru:v:179:y:2002:i:1:p:87-103
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    Cited by:

    1. Ray Barrell & Olga Pomerantz, 2004. "Oil Prices and the World Economy," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 152-177.
    2. Mukhriz Izraf Azman AZIZ & Nor’Aznin Abu BAKAR, 2013. "Oil Price Fluctuations and Changing Comparative Advantage," Sosyoekonomi Journal, Sosyoekonomi Society, issue 20(20).
    3. Aliyu, Shehu Usman Rano, 2009. "Oil Price Shocks and the Macroeconomy of Nigeria: A Non-linear Approach," MPRA Paper 18726, University Library of Munich, Germany, revised 16 Nov 2009.
    4. John Baffes & M. Ayhan Kose & Franziska Ohnsorge & Marc Stocker, 2015. "The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses," Koç University-TUSIAD Economic Research Forum Working Papers 1504, Koc University-TUSIAD Economic Research Forum.
    5. Fritz Breuss, 2002. "Was ECB's monetary policy optimal?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(3), pages 298-319, September.
    6. Rigoberto Ariel Yépez-García & Luis San Vicente Portes & Luis Enrique García, 2013. "Planning for Higher Oil Prices : Power Sector Impact in Latin America and the Caribbean," World Bank Other Operational Studies 17547, The World Bank.
    7. Benjamin L Hunt, 2005. "Oil Price Shocks; Can they Account for the Stagflation in the 1970's?," IMF Working Papers 05/215, International Monetary Fund.
    8. Francesco Guidi, 2010. "The Economic Effects of Oil Prices Shocks on the UK Manufacturing and Services Sectors," The IUP Journal of Applied Economics, IUP Publications, vol. 0(4), pages 5-34, October.
    9. LeBlanc, Michael & Chinn, Menzie David, 2004. "Do High Oil Prices Presage Inflation? The Evidence from G-5 Countries," Santa Cruz Department of Economics, Working Paper Series qt4wt4m7hg, Department of Economics, UC Santa Cruz.
    10. Sánchez, Marcelo, 2008. "Oil shocks and endogenous markups: results from an estimated euro area DSGE model," Working Paper Series 860, European Central Bank.
    11. Yazid Dissou, "undated". "The Increase in World Prices of Commodities: Aggregate and Sectoral Adjustments in Canada," EcoMod2007 23900021, EcoMod.
    12. Menzie D. Chinn & Michael LeBlanc & Olivier Coibion, 2005. "The Predictive Content of Energy Futures: An Update on Petroleum, Natural Gas, Heating Oil and Gasoline," NBER Working Papers 11033, National Bureau of Economic Research, Inc.
    13. Amstad, Marlene & Hildebrand, Philipp, 2005. "The oil price and monetary policy – a new paradigm," MPRA Paper 15562, University Library of Munich, Germany.
    14. Adam, P. & Rianse, U. & Harafah, Ĺ. M. & Cahyono, E. & Rafiy, M., 2016. "A Model of the Dynamics of the Effect of World Crude Oil Price and World Rice Price on Indonesia’s Inflation Rate," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 8(1), March.
    15. Guy M Meredith, 2001. "Why Has the Euro Been so Weak?," IMF Working Papers 01/155, International Monetary Fund.
    16. Mukhriz Izraf Azman Aziz & Jauhari Dahalan, 2015. "The Impacts of Oil Price Fluctuations on Revealed Comparative Advantage of Manufacturing Commodities for ASEAN-5 Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 1098-1108.
    17. Ruiz, Juan, 2004. "Causas y consecuencias de la evolución reciente del precio del petróleo," MPRA Paper 431, University Library of Munich, Germany.
    18. Pablo Pincheira B & Álvaro García M, 2007. "Oil Shocks and Inflation The Case Of Chile and a Sample of Industrial Countries," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 10(1), pages 5-36, April.
    19. Gbadebo Oladosu, 2015. "Oil market developments and the global economy from a general equilibrium perspective," EcoMod2015 8405, EcoMod.
    20. AydIn, Levent & Acar, Mustafa, 2011. "Economic impact of oil price shocks on the Turkish economy in the coming decades: A dynamic CGE analysis," Energy Policy, Elsevier, vol. 39(3), pages 1722-1731, March.
    21. World Bank Group, 2015. "Global Economic Prospects, January 2015 : Having Fiscal Space and Using It," World Bank Publications, The World Bank, number 20758, July.
    22. Michael Pedersen, 2015. "Propagation of Shocks to Food and Energy Prices: A Cross-Country Analysis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(4), pages 272-289, August.
    23. Jürgen Janger & Karin Wagner, 2004. "Sectoral Specialization in Austria and in the EU-15," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 37-54.
    24. C. O. Mgbame & P. A. Donwa & S. A. Ogbaisi, 2015. "Oil price movements and Nigeria`s economic indicators," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(5), pages 59-63, May.

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