Arbeitspapier

Why have the recent oil price declines not stimulated global economic growth?

We analyze the global relationship between oil prices, commodity-specific financial marketshocks and economic activity by means of Structural Vector Autoregressive (SVAR) models for the period 1996 - 2015. For the financial market variables in our model, we use a breakdown of G-20 countries into net commodity exporting and importing countries to compute the real exchange rate between the country groups as well as the corresponding interest rate spread. Regarding the discussion about the missing expansionary effects of the recent oil price declines at the global level, our empirical framework tests the following transmission: A downgrading of financial conditions for commodity exporting countries can lead to a more serious decline of their domestic demand as should be expected from the pure income effect of lower export revenues due to lower oil prices. Therefore, missing expansionary effects of the recent oil price declines should not only be traced back to the absence of expansionary monetary policy effects at the zero lower bound in many commodity importing countries, but also to a high dependency of commodity exporting countries on international financial markets.

Language
Englisch

Bibliographic citation
Series: IMK Working Paper ; No. 185

Classification
Wirtschaft
Multiple or Simultaneous Equation Models; Multiple Variables: General
Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
Energy and the Macroeconomy
Subject
oil price
interest rate spread
real exchange rate
economic growth
sign restriction

Event
Geistige Schöpfung
(who)
Theobald, Thomas
Hohlfeld, Peter
Event
Veröffentlichung
(who)
Institut für Makroökonomie und Konjunkturforschung (IMK), Hans-Böckler-Stiftung
(where)
Düsseldorf
(when)
2017

Handle
URN
urn:nbn:de:101:1-2017112013581
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Theobald, Thomas
  • Hohlfeld, Peter
  • Institut für Makroökonomie und Konjunkturforschung (IMK), Hans-Böckler-Stiftung

Time of origin

  • 2017

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