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dc.contributor.authorMohaddes, Kamiaren
dc.contributor.authorPesaran, MHen
dc.date.accessioned2017-08-14T11:18:13Z
dc.date.available2017-08-14T11:18:13Z
dc.date.issued2017-06en
dc.identifier.issn0140-9883
dc.identifier.urihttps://www.repository.cam.ac.uk/handle/1810/266329
dc.description.abstractThe recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the US and the global economy. In this paper, using a quarterly multi-country econometric model, we first show that a fall in oil prices lowers interest rates and inflation in most countries, and increases global real equity prices. The effects on real output are positive, although they take longer to materialize (around 4 quarters after the shock). We then re-examine the effects of low oil prices on the US economy over different sub-periods using monthly observations on real oil prices, real equity prices and real dividends. We confirm the perverse positive relationship between oil and equity prices over the period since the 2008 financial crisis highlighted in the recent literature, but show that this relationship has been unstable when considered over the longer time period of 1946–2016. In contrast, we find a stable negative relationship between oil prices and real dividends which we argue is a better proxy for economic activity (as compared to equity prices). On the supply side, the effects of lower oil prices differ widely across the different oil producers, and could be perverse initially, as some of the major oil producers try to compensate their loss of revenues by raising production. Taking demand and supply adjustments to oil price changes as a whole, we conclude that oil markets equilibrate but rather slowly, with large episodic swings between low and high oil prices.
dc.description.sponsorshipHashem Pesaran acknowledges Financial support from the Czech Science Foundation under project "DYME - Dynamic Models in Economics, #402/12/G097".
dc.language.isoenen
dc.publisherElsevier
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 Internationalen
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 Internationalen
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/en
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/en
dc.subjectoil pricesen
dc.subjectequity pricesen
dc.subjectdividendsen
dc.subjecteconomic growthen
dc.subjectoil supplyen
dc.subjectglobal oil marketsen
dc.subjectinternational business cycleen
dc.titleOil prices and the global economy: Is it different this time around?en
dc.typeArticle
prism.endingPage325
prism.publicationDate2017en
prism.publicationNameEnergy Economicsen
prism.startingPage315
prism.volume65en
dc.identifier.doi10.17863/CAM.12587
dcterms.dateAccepted2017-05-14en
rioxxterms.versionofrecord10.1016/j.eneco.2017.05.011en
rioxxterms.versionAMen
rioxxterms.licenseref.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/en
rioxxterms.licenseref.startdate2017-06en
dc.contributor.orcidMohaddes, Kamiar [0000-0002-2501-2062]
dc.identifier.eissn1873-6181
rioxxterms.typeJournal Article/Reviewen
cam.issuedOnline2017-05-19en
rioxxterms.freetoread.startdate2018-11-19


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Except where otherwise noted, this item's licence is described as Attribution-NonCommercial-NoDerivatives 4.0 International