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Oil prices and global factor macroeconomic variables

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This paper investigates the relationship between oil prices, and global output, prices, central bank policy interest rate and monetary aggregates with a global factor-augmented error correction model. We confirm the following stylized relationships: i) in line with the quantitative theory of money, at global level, money, output and prices are cointegrated; ii) positive innovation in global oil price is connected with global interest rate tightening; iii) positive innovation in global money, price level and output is connected with an increase in oil prices; iv) positive innovations in global interest rate are associated with a decline in oil prices; v) positive shocks to the trade weighted U.S. dollar are linked with reductions in oil price; vi) the U.S., Euro area and China are the main drivers of global macroeconomic factors.

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  • Ratti, Ronald & Vespignani, Joaquin, 2015. "Oil prices and global factor macroeconomic variables," Working Papers 2015-08, University of Tasmania, Tasmanian School of Business and Economics.
  • Handle: RePEc:tas:wpaper:22665
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    Cited by:

    1. Raphael Raduzzi & Antonio Ribba, 2017. "The Macroeconomics Outcome of Oil Shocks in the Small Eurozone Economies," Center for Economic Research (RECent) 127, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    2. repec:eee:eneeco:v:67:y:2017:i:c:p:83-90 is not listed on IDEAS

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    Keywords

    Global interest rate; global monetary aggregates; oil prices; GFAVEC;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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