The Differential Effects of Oil Demand and Supply Shocks on the Global Economy

By Paul Cashin, Kamiar Mohaddes, Maizar Raissi. Social Science Research Network, 2012

261 citations recorded by the source corpus.

We employ a set of sign restrictions on the generalized impulse responses of a Global VAR-model, estimated for 38 countries/regions over the period 1979-2011Q2, to discriminate - between supply-driven and demand-driven oil-price shocks and to study the time profile of their macroeconomic effects for different countries. The results indicate that the economic-consequences of a supply-driven oil-price shock are very different from those of an oil-demand shock driven by global economic activity, and vary for oil-importing countries compared to energy exporters. While oil importers typically face a long-lived fall in economic activity in response to a supply-driven surge in oil prices, the impact is positive for energy-exporting countries that possess large proven oil/gas reserves. However, in response to an oil-demand disturbance, almost all countries in our sample experience long-run inflationary pressures and a short-run increase in real output.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/39140ea624041f1546f5d3c27b6dacc227e5a2db

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Citations in the corpus

Determinants of Global Spillovers from US Monetary Policy (2015, background): “2), see also Eickmeier and Ng (2011); Cashin et al. (2012); Rebucci et al.”
Oil Prices and the Global Economy: Is it Different this Time Around? (2016, unknown): “…extensive literature on the economic consequences of oil shocks for the global economy in terms of their impacts on real output and real equity prices, see for instance, Hamilton (2009), Kilian (2009), Cashin et al. (2014), Mohaddes and Pesaran (2016), and Mohaddes and Raissi (2015) among others.”
Implications of oil prices shocks for the major emerging economies: A comparative analysis of BRICS (2018, unknown): “Differences on the impact of low oil prices on trade balance of an oil-importing country to that of an oil-exporting country is expected, the impact of positive and negative oil shocks on macroeconomic variables differs both in the way and extents (Narayan and Sharma, 2011; Cashin et al., 2014).”
Importance of oil shocks and the GCC macroeconomy: A structural VAR analysis (2019, background): “2009 and 2011, Narayan and Sharma 2011, Le and Chang 2013, Cashin et al. 2014, Rafiq et al. 2016). Hence, it can be assumed that their economies shall behave like any other oil-exporting country. However, such an analogy would be at least an oversimplification as the effects of oil shocks could vary”
Regional economic development and tourism: A literature review to highlight future directions for regional tourism research (2019, background): “Time-series and structural vector autoregressive (VAR) approaches include studies by Andraz et al. (2015) and Cashin et al. (2014).”
The impact of oil shocks on exchange rates: A Markov-switching approach (2016, background): “…rates to various oil shocks vary substantially across oil-exporting and oil-importing countries, reflecting that exchange rates are affected by various country-specific differences in monetary and fiscal policies, exchange rate regimes, and product and labor market rigidities (Cashin et al., 2014).”
The shocks matter: Improving our estimates of exchange rate pass-through (2018, unknown): “To test this, he identifies fundamental shocks in 4 The differential effects of oil demand and supply shocks are discussed in, for example, Cashin et al. (2014).”
Fair Weather or Foul? The Macroeconomic Effects of El Niño* (2015, unknown): “Therefore, what was initially an increase in oil prices due to higher demand from Asia translates into a global oil demand shock (oil prices increasing at the same time as global output rises; see Cashin et al. 2014 and Cashin et al. 2012 for details) a couple of quarters later.”