Oil Price Shocks and Stock Market Booms in an Oil Exporting Country

Arbeitspapier

This paper analyses the effects of oil price shocks on stock returns in Norway, an oil exporting country, highlighting the transmission channels of oil prices for macroeconomic behaviour. To capture the interaction between the different variables, stock returns are incorporated into a structural VAR model, as stock prices are an important transmission channel of wealth in an oil abundant country. I find that following a 10 percent increase in oil prices, stock returns increase by 2.5 percent, after which the effect eventually dies out. The results are robust to different (linear and non-linear) transformations of oil prices. The effects on the other variables are more modest. However, all variables indicate that the Norwegian economy responds to higher oil prices by increasing aggregate wealth and demand. The results also emphasize the role of other shocks; monetary policy shocks in particular, as important driving forces behind stock price variability in the short term.

Object Details

• ISBN: 978-82-7553-457-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2008/16

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Financial Markets and the Macroeconomy ; Monetary Policy
• Subject: VAR ; oil price shocks ; monetary policy ; stock market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bjørnland, Hilde C.
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/209907
• Last update: 10.03.2025, 11:41 AM CET