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The Differential Effects of Oil Demand and Supply Shocks on the Global Economy

Paul Cashin (), Kamiar Mohaddes (), Mehdi Raissi and Maziar Raissi

No 12/253, IMF Working Papers from International Monetary Fund

Abstract: 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: Interconnectedness; Global VAR (GVAR), global macroeconomic modeling, impulse responses, international business cycle, oil-demand and oil-supply shocks, oil exporters, exporters, oil prices, exporting countries, Time-Series Models, Forecasting and Simulation, International Business Cycles, Forecasting and Simulation, Demand and Supply, (search for similar items in EconPapers)
Date: 2012-10-23
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Related works:
Journal Article: The differential effects of oil demand and supply shocks on the global economy (2014) Downloads
Working Paper: The Differential Effects of Oil Demand and Supply Shocks on the Global Economy (2013) Downloads
Working Paper: The Differential Effects of Oil Demand and Supply Shocks on the Global Economy (2012) Downloads
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