The Differential Effects of Oil Demand and Supply Shocks on the Global Economy
Paul Cashin (),
Kamiar Mohaddes (),
Maziar Raissi and
Authors registered in the RePEc Author Service: Mehdi Raissi
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
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: Global VAR (GVAR); interconnectedness; global macroeconomic modeling; impulse responses; international business cycle; oil-demand and oil-supply shocks. (search for similar items in EconPapers)
JEL-codes: C32 E17 F44 F47 Q41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa and nep-ene
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Journal Article: The differential effects of oil demand and supply shocks on the global economy (2014)
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Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:1249
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