The Differential Effects of Oil Demand and Supply Shocks on the Global Economy

Paul Cashin (), Kamiar Mohaddes, Mehdi Raissi and Maziar Raissi

No 2012/253, IMF Working Papers from International Monetary Fund

Abstract: We employ a set of sign restrictions on the generalized impulse responses of a Global VAR model, estimated for 38 countries/regions over the period 1979Q2–2011Q2, to discriminate between supply-driven and demand-driven oil-price shocks and to study the time profile of their macroeconomic effects for different countries. The results indicate that the economic consequences of a supply-driven oil-price shock are very different from those of an oil-demand shock driven by global economic activity, and vary for oil-importing countries compared to energy exporters. While oil importers typically face a long-lived fall in economic activity in response to a supply-driven surge in oil prices, the impact is positive for energy-exporting countries that possess large proven oil/gas reserves. However, in response to an oil-demand disturbance, almost all countries in our sample experience long-run inflationary pressures and a short-run increase in real output.

Keywords: WP; Global VAR (GVAR); interconnectedness; global macroeconomic modeling; impulse responses; international business cycle; oil-demand and oil-supply shocks; oil exporter; oil-price shock; oil price; shock result; error correction term; Oil; Oil prices; Vector autoregression; Oil production; Real effective exchange rates; Global; Middle East; Africa; North Africa (search for similar items in EconPapers)
Pages: 41
Date: 2012-10-23
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Citations: View citations in EconPapers (24)

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Related works:
Journal Article: The differential effects of oil demand and supply shocks on the global economy (2014)
Working Paper: The Differential Effects of Oil Demand and Supply Shocks on the Global Economy (2013)
Working Paper: The Differential Effects of Oil Demand and Supply Shocks on the Global Economy (2012)
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