Uncovering Long Term Relationships between Oil Prices and the Economy: A Time-Varying Cointegration Analysis

Fabian Gogolin, Fearghal Kearney, Brian Lucey, Maurice Peat and Samuel Vigne

No 2018/04, QBS Working Paper Series from Queen's University Belfast, Queen's Business School

Abstract: Establishing the relation between oil price movements and macroeconomic performance is of great importance for firms and policymakers, alike. Prior studies established this relation using the assumption that the long-run relation is intertemporally constant. However, there is much recent evidence demonstrating that this assumption may not hold in practice. To address this issue and go beyond the restrictive time-invariant environment, we employ the use of the time-varying cointegration framework of Bierens 2010. We present evidence of the long-run oil-economy relation evolving over the 1974-2015 period, with major events such as the Gulf War and the financialisation of commodity markets proving to be driving forces across the U.S., European and G7 economies considered.

Keywords: Marcoeconomy; oil prices; WTI Oil; Brent Oil; long-run (search for similar items in EconPapers)
JEL-codes: Q43 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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Journal Article: Uncovering long term relationships between oil prices and the economy: A time-varying cointegration analysis (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:qmsrps:201804

DOI: 10.2139/ssrn.3242941

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