IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Crude Oil Prices and Liquidity, the BRIC and G3 countries

Unanticipated increases in the BRIC countries’ liquidity lead to significant and persistent increases in real oil prices, global oil production and global real aggregate demand. Unanticipated shocks to the liquidity of developed countries over 1997:01-2011:12 do not. The relative contribution to real oil price of liquidity in BRIC countries to liquidity in developed countries is much greater since 2005 than before 2005. China and India drive the results for the effect of BRIC countries’ liquidity on real oil price and global oil production. China and India and Brazil and Russia reinforce one another on the effect of liquidity on global real aggregate demand. Due to the difference between countries as commodity importers/exporters, the liquidity of Brazil and Russia increases significantly with a rise in real oil price and that of China and India decreases significantly with a rise in real oil price. It is shown that the strong rebound in oil price during 2009 is mostly due to strong effects of shocks to liquidity in the BRIC countries. The analysis helps in assessing the importance of the BRIC economies in the upsurge of the real price of crude oil.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by University of Tasmania, School of Economics and Finance in its series Working Papers with number 15727.

in new window

Length: 29 pages
Date of creation: 17 Dec 2012
Date of revision: 17 Dec 2012
Publication status: Published by the University of Tasmania. Discussion paper 2012-11
Handle: RePEc:tas:wpaper:15727
Contact details of provider: Postal: Private Bag 85, Hobart, Tasmania 7001
Phone: +61 3 6226 7672
Fax: +61 3 6226 7587
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Ron Alquist & Lutz Kilian, 2010. "What do we learn from the price of crude oil futures?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 539-573.
  2. Rüffer, Rasmus & Stracca, Livio, 2006. "What is global excess liquidity, and does it matter?," Working Paper Series 0696, European Central Bank.
  3. Martin Bodenstein & Christopher J. Erceg & Luca Guerrieri, 2008. "Optimal monetary policy with distinct core and headline inflation rates," International Finance Discussion Papers 941, Board of Governors of the Federal Reserve System (U.S.).
  4. Adalid, Ramón & Detken, Carsten, 2007. "Liquidity shocks and asset price boom/bust cycles," Working Paper Series 0732, European Central Bank.
  5. Ansgar Belke & Ingo Bordon & Torben Hendricks, 2010. "Global liquidity and commodity prices-a cointegrated VAR approach for OECD countries," Applied Financial Economics, Taylor & Francis Journals, vol. 20(3), pages 227-242.
  6. Sousa, Joao Miguel & Zaghini, Andrea, 2006. "Global monetary policy shocks in the G5: A SVAR approach," CFS Working Paper Series 2006/30, Center for Financial Studies (CFS).
  7. A. Anzuini & M. J. Lombardi & P. Pagano, 2013. "The Impact of Monetary Policy Shocks on Commodity Prices," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 125-150, September.
  8. Dieter Gerdesmeier & Hans‐Eggert Reimers & Barbara Roffia, 2010. "Asset Price Misalignments and the Role of Money and Credit," International Finance, Wiley Blackwell, vol. 13(3), pages 377-407, Winter.
  9. Sánchez-Fung, José R., 2012. "Examining the role of monetary aggregates in China," BOFIT Discussion Papers 18/2012, Bank of Finland, Institute for Economies in Transition.
  10. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," NBER Working Papers 15002, National Bureau of Economic Research, Inc.
  11. Kim, In-Moo & Loungani, Prakash, 1992. "The role of energy in real business cycle models," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 173-189, April.
  12. Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," G.R.E.Q.A.M. 96a09, Universite Aix-Marseille III.
  13. Klaas Baks & Charles Frederick Kramer, 1999. "Global Liquidity and Asset Prices: Measurement, Implications, and Spillovers," IMF Working Papers 99/168, International Monetary Fund.
  14. Jeffrey A Frankel & Andrew K Rose, 2010. "Determinants of Agricultural and Mineral Commodity Prices," RBA Annual Conference Volume, in: Renée Fry & Callum Jones & Christopher Kent (ed.), Inflation in an Era of Relative Price Shocks Reserve Bank of Australia.
  15. Sylvain Leduc & Keith Sill, 2006. "Monetary policy, oil shocks, and TFP: accounting for the decline in U.S. volatility," International Finance Discussion Papers 873, Board of Governors of the Federal Reserve System (U.S.).
  16. D'Agostino, A & Surico, P, 2007. "Does global liquidity help to forecast US inflation?," MPRA Paper 6283, University Library of Munich, Germany.
  17. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  18. Fan, Longzhen & Yu, Yihong & Zhang, Chu, 2011. "An empirical evaluation of China's monetary policies," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 358-371, June.
  19. Lutz Kilian & Bruce Hicks, 2013. "Did Unexpectedly Strong Economic Growth Cause the Oil Price Shock of 2003–2008?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 32(5), pages 385-394, 08.
  20. Selim Elekdag & Ren� Lalonde & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2008. "Oil Price Movements and the Global Economy: A Model-Based Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 55(2), pages 297-311, June.
  21. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  22. Max Gillman & Anton Nakov, 2009. "Monetary effects on nominal oil prices," Banco de Espa�a Working Papers 0928, Banco de Espa�a.
  23. Sophie Brana & Marie-Louise Djibenou & Stéphanie Prat, 2012. "Global excess liquidity and asset prices in emerging countries: a pvar approach," Working Papers hal-00740102, HAL.
  24. Kilian, Lutz, 2006. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," CEPR Discussion Papers 5994, C.E.P.R. Discussion Papers.
  25. Ratti, Ronald & Vespignani, Joaquin, 2012. "Liquidity and crude oil prices: China’s influence over 1996-2011," Working Papers 15062, University of Tasmania, School of Economics and Finance, revised 20 Sep 2012.
  26. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
  27. Renee Fry & Callum Jones & Christopher Kent, 2010. "Inflation in an Era of Relative Pirce Shocks," CAMA Working Papers 2010-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  28. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
  29. Barsky, Robert & Kilian, Lutz, 2004. "Oil and the Macroeconomy Since the 1970s," CEPR Discussion Papers 4496, C.E.P.R. Discussion Papers.
  30. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
  31. Martin Bodenstein & Luca Guerrieri & Lutz Kilian, 2012. "Monetary Policy Responses to Oil Price Fluctuations," IMF Economic Review, Palgrave Macmillan, vol. 60(4), pages 470-504, December.
  32. Belke, Ansgar & Orth, Walter & Setzer, Ralph, 2010. "Liquidity and the dynamic pattern of asset price adjustment: A global view," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1933-1945, August.
  33. 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.
  34. Lutz Kilian & Logan T. Lewis, 2011. "Does the Fed Respond to Oil Price Shocks?," Economic Journal, Royal Economic Society, vol. 121(555), pages 1047-1072, 09.
  35. Anton Nakov & Andrea Pescatori, 2010. "Monetary Policy Trade-Offs with a Dominant Oil Producer," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(1), pages 1-32, 02.
  36. Frankel, Jeffrey A & Hardouvelis, Gikas A, 1985. "Commodity Prices, Money Surprises and Fed Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 425-38, November.
  37. James D. Hamilton, 2011. "Historical Oil Shocks," NBER Working Papers 16790, National Bureau of Economic Research, Inc.
  38. Greiber, Claus & Setzer, Ralph, 2007. "Money and housing: evidence for the euro area and the US," Discussion Paper Series 1: Economic Studies 2007,12, Deutsche Bundesbank, Research Centre.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tas:wpaper:15727. 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: (Derek Rowlands)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.