Oil prices and global factor macroeconomic variables

Ronald Ratti and Joaquin Vespignani

No 2015-08, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: This paper investigates the relationship between oil prices, and global output, prices, central bank policy interest rate and monetary aggregates with a global factor-augmented error correction model. We confirm the following stylized relationships: i) in line with the quantitative theory of money, at global level, money, output and prices are cointegrated; ii) positive innovation in global oil price is connected with global interest rate tightening; iii) positive innovation in global money, price level and output is connected with an increase in oil prices; iv) positive innovations in global interest rate are associated with a decline in oil prices; v) positive shocks to the trade weighted U.S. dollar are linked with reductions in oil price; vi) the U.S., Euro area and China are the main drivers of global macroeconomic factors.

Keywords: Global interest rate; global monetary aggregates; oil prices; GFAVEC (search for similar items in EconPapers)
JEL-codes: E44 E50 Q43 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2015
New Economics Papers: this item is included in nep-ene, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published by the University of Tasmania. Discussion paper 2015-08

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Journal Article: Oil prices and global factor macroeconomic variables (2016)
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