The Macroeconomic Effects of Higher Oil Prices

Peter Isard, Benjamin Hunt and Douglas Laxton

No 2001/014, IMF Working Papers from International Monetary Fund

Abstract: The paper uses MULTIMOD to analyze the macroeconomic effects of oil price shocks, distinguishing between temporary, more persistent, and permanent shocks. It provides perspectives on several findings in the literature and the key role of monetary policy in influencing macroeconomic outcomes. Specific attention is paid to the channels through which oil price increases can pass through into core inflation, a possible explanation of the asymmetric relationship between oil prices and economic activity, the role of monetary policy credibility, the implications of delayed policy responses, and the relative merits of leaning in different directions when the correct policy response is uncertain.

Keywords: WP; oil price; nominal interest rate; oil-price shock; price nexus; core inflation effect; oil price shocks; MULTIMOD; monetary policy; increase series; aggregate absorption price deflator; oil-price effects; oil price increase series; shock pass; oil price change; MULTIMOD input cost; oil price decrease; inflation expectation; price behavior; Oil prices; Inflation; Inflation targeting; Deflation; Consumer price indexes; Global (search for similar items in EconPapers)
Pages: 46
Date: 2001-02-01
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Citations: View citations in EconPapers (38)

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Journal Article: The Macroeconomic Effects of Higher Oil Prices (2002)
Journal Article: The Macroeconomic Effects of Higher Oil Prices (2002)
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