Monetary effects on nominal oil prices
Max Gillman () and
Anton Nakov ()
No 928, Working Papers from Banco de España, Working Papers Homepage
The paper presents a theory of nominal asset prices for competitively owned oil. Focusing on monetary effects, with flexible oil prices the US dollar oil price should follow the aggregate US price level. But with rigid nominal oil prices, the nominal oil price jumps proportionally to nominal interest rate increases. We find evidence for structural breaks in the nominal oil price that are used to illustrate the theory of oil price jumps. The evidence also indicates strong Granger causality of the oil price by US inflation as is consistent with the theory.
Keywords: oil prices; inflation; cash-in-advance; multiple structural breaks; Granger causality (search for similar items in EconPapers)
JEL-codes: E31 E4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ene, nep-mac and nep-mon
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Journal Article: Monetary effects on nominal oil prices (2009)
Working Paper: Monetary Effects on Nominal Oil Prices (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0928
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