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Assessment of Post-2003 Crude Oil Price Hike Through Wavelet Coherency Analysis

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  • Mustafa Koray Kalafatcilar
  • Mustafa utku Ozmen

Abstract

Post-2003 hike and the resurgence after the global financial crisis of crude oil prices have drawn a great deal of attention from researchers and policy makers. Focusing on that episode, particularly around 2008, we contribute to the empirical literature with an aim to identify the co-movement patterns between oil price and its various determinants. For this purpose, we employ the continuous wavelet transformation based tools of coherence analysis. This allows us to track the co-movement in a time-varying fashion at different frequency bands between two variables. We consider the relation of oil prices with both real side factors and speculative financial activity. Our empirical findings are basically in line with the fundamentals approach and only point to ripple effects from the speculative activity. While the real side variables -especially OPEC (Organization of the Petroleum Exporting Countries) spare capacity and demand from emerging markets- become more coherent with the real WTI (West Texas Intermediate) oil price over the post-2003 period and climaxing around 2008, speculative activity fails to present any strong relation with the real WTI price. Coherence between speculative activity and oil price is evident only at very high frequencies and no significant co-movement is detected around 2008 period.

Suggested Citation

  • Mustafa Koray Kalafatcilar & Mustafa utku Ozmen, 2015. "Assessment of Post-2003 Crude Oil Price Hike Through Wavelet Coherency Analysis," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 15(1), pages 19-38.
  • Handle: RePEc:tcb:cebare:v:15:y:2015:i:1:p:19-38
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2015/Volume+15-1/
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    Citations

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    Cited by:

    1. Özmen, M. Utku & Yılmaz, Erdal, 2017. "Co-movement of exchange rates with interest rate differential, risk premium and FED policy in “fragile economies”," Emerging Markets Review, Elsevier, vol. 33(C), pages 173-188.
    2. M. Utku Ozmen & Erdal Yilmaz, 2016. "Co-movement of Exchange Rates with Interest Rate Differential, Risk Premium and FED Policy in �Fragile Economies�," Working Papers 1621, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

    More about this item

    Keywords

    Oil price; Wavelet coherency; Speculation; Emerging markets;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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