The impact of monetary policy on oil process parameters and market expectations

Hossein Askari () and Noureddine Krichene

Global Finance Journal, 2010, vol. 21, issue 2, 186-200

Abstract: Following record low interest rates and a depreciating US dollar, crude oil prices came under increasing pressure during the period 2003M5-2007M10. Oil price process parameters changed dramatically toward consistently rising prices. Short-term forecasting implied the persistence of the observed trend, as market fundamentals and underlying monetary policy were supportive of these trends. Market expectations derived from option prices anticipated further surge in oil prices and indicated a significant probability of right tail events. A tightening of monetary policy may be essential for restoring stability to oil markets and in turn for sustained economic growth.

Keywords: Crude; oil; prices; Esscher; transform; Inverse; problem; Normal; inverse; Gaussian; Monetary; policy (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:21:y:2010:i:2:p:186-200

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