The macroeconomic and financial effects of oil price shocks

Song Zhou and Dong Wang ()

MPRA Paper from University Library of Munich, Germany

Abstract: The oil price shock is considered as a major contributor to economic fluctuation. In this paper, we investigate whether the impulse responses of different macroeconomic variables and financial variables to the oil price shock and the effect of interest rates change. And we also use Granger Causality Test to evaluate the correlation between oil prices, stock markets and gold prices. Estimation results based on the U.S. data suggest that: (i) The oil price shock has a significant impact on inflation, stock markets and gold prices and it also has a short-term impact on interest rates. (ii) Co-movement of oil prices, stock markets and gold prices exist. (iii) Changing interest rates as monetary policy can induce price puzzle in order to reduce the inflation caused by the oil price shock.

Keywords: VAR; Granger Causality; oil prices (search for similar items in EconPapers)
JEL-codes: E32 Q43 (search for similar items in EconPapers)
Date: 2012-11-02
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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