Crude Oil Prices and Liquidity, the BRIC and G3 countries

Ronald Ratti and Joaquin Vespignani

No 15727, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: Unanticipated increases in the BRIC countries’ liquidity lead to significant and persistent increases in real oil prices, global oil production and global real aggregate demand. Unanticipated shocks to the liquidity of developed countries over 1997:01-2011:12 do not. The relative contribution to real oil price of liquidity in BRIC countries to liquidity in developed countries is much greater since 2005 than before 2005. China and India drive the results for the effect of BRIC countries’ liquidity on real oil price and global oil production. China and India and Brazil and Russia reinforce one another on the effect of liquidity on global real aggregate demand. Due to the difference between countries as commodity importers/exporters, the liquidity of Brazil and Russia increases significantly with a rise in real oil price and that of China and India decreases significantly with a rise in real oil price. It is shown that the strong rebound in oil price during 2009 is mostly due to strong effects of shocks to liquidity in the BRIC countries. The analysis helps in assessing the importance of the BRIC economies in the upsurge of the real price of crude oil.

Keywords: Oil price; BRIC countries; China and India; Glocal liquidity (search for similar items in EconPapers)
JEL-codes: E31 E32 E51 F01 G15 Q43 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012-12-17, Revised 2012-12-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published by the University of Tasmania. Discussion paper 2012-11

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Related works:
Journal Article: Crude oil prices and liquidity, the BRIC and G3 countries (2013)
Working Paper: Crude Oil Prices and Liquidity, the BRIC and G3 countries (2012)
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