 Oil Prices and the World EconomyNo 242, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research Abstract: Oil prices have been associated with bouts of inflation and economic instability over the last 30 years, and they have been rising in recent months. We argue that the inflationary consequences of a rise in oil prices depend upon the policy response of the monetary authorities. They can ameliorate the short term impacts on output, but only at the cost of higher inflation. In the short term the size and distribution of output effects from an increase in oil prices depends on the intensity of oil use in production and on the speed at which oil producers spend their revenue. In the medium term higher oil prices change the terms of trade between the OECD and the rest of the world and hence reduce the equilibrium level of output in the OECD. In this paper we first discuss oil market developments and survey previous studies on the impacts of increases in oil prices. We then use our model, NiGEM, to evaluate the impact of temporary and permanent oil price increases on the world economy under various policy responses, and also analyse the impact of a decline in the speed of oil revenue recycling. Date: 2004-07 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:242 Access Statistics for this paper More papers in National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research 2 Dean Trench Street Smith Square London SW1P 3HE. Contact information at EDIRC. |
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