Cyclical behavior of crude oil markets and economic recessions in the period 1986–2010

Jose Alvarez-Ramirez, Eduardo Rodriguez, Esteban Martina and Carlos Ibarra-Valdez

Technological Forecasting and Social Change, 2012, vol. 79, issue 1, 47-58

Abstract: For at least one century, crude oil has been one of the most important commodities for the worldwide economic activity. Important technological innovations, including chemical transformation processes and transportation systems, have been based on the availability or not of crude oil. In this way, a close understanding of the crude oil market dynamics should provide insights in important aspects related to potential directions of technological change for both improving crude oil transformation efficiency and substitution by alternative energy sources. This paper studies the dynamics of the crude oil price for the period from 1986 to 2010. To this end, the entropy time-asymmetry is computed along the price trajectory. Empirical results indicated the presence of a non-regular cyclical behavior with a dominant period of about 4.5years. Some evidences pointing toward a comovement of entropy time-asymmetry peaks with major US economic recessions are found, suggesting a tight relationship between macroeconomy and crude oil prices. The results are discussed in terms of the major economic events that occurred in the upward and downward cycle periods and potential implications for the design of energy policies.

Keywords: Crude oil; 4.5-year cycles; Recessions (search for similar items in EconPapers)
JEL-codes: E32 G14 Q43 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:79:y:2012:i:1:p:47-58

DOI: 10.1016/j.techfore.2011.04.010

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