Oil Price Uncertainty in a Small Open Economy

Yusuf Soner Başkaya, Timur Hulagu and Hande Kucuk ()
Authors registered in the RePEc Author Service: Yusuf Soner Baskaya

IMF Economic Review, 2013, vol. 61, issue 1, 168-198

Abstract: In this paper, the business cycle implications of oil price uncertainty are analyzed for an oil-importing small open economy. Higher volatility in oil prices works through two main channels. On one hand, it makes the marginal product of capital riskier, creating an incentive to substitute away from capital. On the other hand, it increases the demand for precautionary savings. The latter may imply higher capital accumulation in response to a rise in oil price uncertainty depending on whether agents have access to an international bond as an alternative asset. The investment decline because of higher oil price volatility under financial integration is almost twice as much as the decline under financial autarky. Moreover, the interaction between shocks to the level and volatility of oil prices is quantitatively important.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.palgrave-journals.com/imfer/journal/v61/n1/pdf/imfer20135a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/imfer/journal/v61/n1/full/imfer20135a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Oil Price Uncertainty in a Small Open Economy (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:imfecr:v:61:y:2013:i:1:p:168-198

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2

Access Statistics for this article

More articles in IMF Economic Review from Palgrave Macmillan, International Monetary Fund
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().