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How Did Monetary Policy Inflate Oil Prices Following the Subprime Mortgage Crisis?

In: Monetary Policy and the Oil Market

Author

Listed:
  • Naoyuki Yoshino

    (Asian Development Bank Institute (ADBI))

  • Farhad Taghizadeh-Hesary

    (Keio University)

Abstract

This research examines how monetary policy has affected crude oil prices after the subprime mortgage crisis. Our earlier research (Taghizadeh-Hesary F, Yoshino N, OPEC Energy Rev 38(1):1–20, 2014) found a significant impact of easy monetary policy on energy prices from 1980 to 2011. This chapter reports that the quantitative easing of United States (US) monetary policies weakened the US dollar by shifting US investors to invest in the oil market and other commodity markets. An empirical analysis shows that the weaker exchange rate of the dollar pushed up the oil price in 2009–2012, while world gross domestic product was not significant at all since the global economy was in a recession in that period. This trend had the effect of imposing a longer recovery time on the global economy, as oil has been shown to be one of the most important production inputs.

Suggested Citation

  • Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2016. "How Did Monetary Policy Inflate Oil Prices Following the Subprime Mortgage Crisis?," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Monetary Policy and the Oil Market, edition 1, chapter 0, pages 55-73, Springer.
    • Handle: RePEc:spr:adbchp:978-4-431-55797-5_4
    DOI: 10.1007/978-4-431-55797-5_4
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    More about this item

    Keywords

    Oil prices; Monetary policies; Subprime mortgage crisis; Exchange rate;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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