A Simple Model of an Oil Based Global Savings Glut: The "China Factor" and the OPEC Cartel
The purpose of this contribution is to illustrate the mechanism by which higher oil prices might lead to lower interest rates in the context of a simple model that takes into account the global external savings equilibrium. The simple model has interesting implications for how one views the huge US current account deficit and how the emergence of China's savings surplus and oil supply shocks impact the global economy. We show that the new equilibrium is located at a lower interest rate but also at a lower growth rate than without the China effect. Moreover, we argue that the lower real interest rates resulting from excess OPEC savings have facilitated the adjustment to the subprime crisis.
|Date of creation:||2009|
|Contact details of provider:|| Postal: Mohrenstraße 58, D-10117 Berlin|
Web page: http://www.diw.de/en
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivier J. Blanchard & Marianna Riggi, 2013.
"WHY ARE THE 2000s SO DIFFERENT FROM THE 1970s? A STRUCTURAL INTERPRETATION OF CHANGES IN THE MACROECONOMIC EFFECTS OF OIL PRICES,"
Journal of the European Economic Association,
European Economic Association, vol. 11(5), pages 1032-1052, October.
- Olivier J. Blanchard & Marianna Riggi, 2009. "Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices," NBER Working Papers 15467, National Bureau of Economic Research, Inc.
- Mohamed Arouri & Christophe Rault, 2010. "Oil Prices and Stock Markets: What Drives What in the Gulf Corporation Council Countries," International Economics, CEPII research center, issue 122, pages 41-56.
- Christophe Rault & ohamed El Hedi AROURI, 2009. "Oil prices and stock markets: what drives what in the Gulf Corporation Council countries?," William Davidson Institute Working Papers Series wp960, William Davidson Institute at the University of Michigan.
- Mohamed El Hedi Arouri & Christophe Rault, 2010. "Oil Prices and Stock Markets: What Drives what in the Gulf Corporation Council Countries?," CESifo Working Paper Series 2934, CESifo Group Munich.
- Wirl, Franz, 2009. "OPEC as a political and economical entity," European Journal of Political Economy, Elsevier, vol. 25(4), pages 399-408, December.
- Dermot Gately, 2004. "OPEC's Incentives for Faster Output Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 75-96.
- Paul Welfens, 2008. "Portfolio modelling and growth in open economies," International Economics and Economic Policy, Springer, vol. 5(3), pages 237-253, November.
- Eyal Dvir & Kenneth S. Rogoff, 2009. "Three Epochs of Oil," NBER Working Papers 14927, National Bureau of Economic Research, Inc.
- Ben S. Bernanke, 2007. "Global imbalances: recent developments and prospects," Speech 317, Board of Governors of the Federal Reserve System (U.S.).
- Dermot Gately & Hiliard G. Huntington, 2002. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
- Gately, D. & Huntington, H.G., 2001. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," Working Papers 01-01, C.V. Starr Center for Applied Economics, New York University.
- Alan Greenspan, 2005. "China: testimony before the Committee on Finance, U.S. Senate, June 23, 2005," Speech 125, Board of Governors of the Federal Reserve System (U.S.).
- Wayne D. Angell, 1992. "Commodity Prices and Monetary Policy: What Have We Learned?," Cato Journal, Cato Journal, Cato Institute, vol. 12(1), pages 185-192, Spring/Su.
- Eckhard Wurzel & Luke Willard & Patrice Ollivaud, 2009. "Recent Oil Price Movements: Forces and Policy Issues," OECD Economics Department Working Papers 737, OECD Publishing.
- Akram, Q. Farooq, 2009. "Commodity prices, interest rates and the dollar," Energy Economics, Elsevier, vol. 31(6), pages 838-851, November.
- Q. Farooq Akram, 2008. "Commodity prices, interest rates and the dollar," Working Paper 2008/12, Norges Bank.
- Matthew Higgins & Thomas Klitgaard & Robert Lerman, 2006. "Recycling petrodollars," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 12(Dec).
- Robert B. Barsky & Lutz Kilian, 2002. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 137-198 National Bureau of Economic Research, Inc.
- Robert B. Barsky & Lutz Kilian, 2001. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Working Papers 8389, National Bureau of Economic Research, Inc.
- Ben S. Bernanke, 2005. "The global saving glut and the U.S. current account deficit," Speech 77, Board of Governors of the Federal Reserve System (U.S.).
- Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 871-909, December.
- Kilian, Lutz, 2007. "The Economic Effects of Energy Price Shocks," CEPR Discussion Papers 6559, C.E.P.R. Discussion Papers.
- Robert H. Rasche & John A. Tatom, 1977. "The effects of the new energy regime on economic capacity, production, and prices," Review, Federal Reserve Bank of St. Louis, issue May, pages 2-12.
- James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
- James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
- Rasche, Robert H. & Tatom, John A., 1981. "Energy price shocks, aggregate supply and monetary policy: The theory and the international evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 14(1), pages 9-93, January.
- repec:fip:fedgsq:y:2007:i:sep11 is not listed on IDEAS
- repec:fip:fedgsq:y:2005:i:mar10 is not listed on IDEAS Full references (including those not matched with items on IDEAS)