Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-22T18:54:37.905Z Has data issue: false hasContentIssue false
  • English
  • Français

The Macroeconomic Effects of Higher Oil Prices

Published online by Cambridge University Press:  26 March 2020

Benjamin Hunt ,
Peter Isard  and
Douglas Laxton
Douglas Laxton
Affiliation:
Research Department, International Monetary Fund
Get access Rights & Permissions [Opens in a new window]

Abstract

The paper uses MULTIMOD to analyse the macroeconomic effects of oil price shocks, distinguishing between temporary, more persistent, and permanent shocks. It provides perspectives on several findings in the literature and the key role of monetary policy in influencing macroeconomic outcomes. Specific attention is paid to the channels through which oil price increases can pass through into core inflation, the implications of delayed policy responses, and the relative merits of leaning in different directions when the correct policy response is uncertain.

Type
Research Article
Information
National Institute Economic Review , Volume 179 , January 2002 , pp. 87 - 103
Copyright
Copyright © 2002 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

∗

The views expressed in this paper are those of the authors and do not necessarily reflect those of the IMF. The authors are grateful to John Helliwell and Warwick McKibbin for helpful discussions.

References

Bernanke, B., Gertler, M. and Watson, M. (1997), ‘Systematic monetary policy and the effects of oil price shocks’, Brookings Papers on Economic Activity, 1, pp. 91–157.CrossRefGoogle Scholar
Cashin, P., McDermott, J. and Scott, A. (1999), ‘Booms and slumps in world commodity prices’, IMF Working Paper WP/99/155.CrossRefGoogle Scholar
Clark, P., Laxton, D. and Rose, D. (2001), ‘An evaluation of alternative monetary policy rules in a model with capacity constraints’, Journal of Money Credit and Banking, 33, 1, February, pp. 42–64.CrossRefGoogle Scholar
Drew, A. and Hunt, B. (2000), ‘Efficient policy rules and the implications of potential output uncertainty’, Journal of Economics and Business, 52, 1/2, January/April, pp. 143–160.CrossRefGoogle Scholar
Hamilton, J. (1983), ‘Oil and the macroeconomy since World War II’, Journal of Political Economy, 91, pp. 228–248.CrossRefGoogle Scholar
Hamilton, J. (1996), ‘This is what happened to the oil price-macroeconomy relationship’, Journal of Monetary Economics, 38, pp. 215–220CrossRefGoogle Scholar
Hamilton, J. (2000), ‘What is an oil shock?’ NBER Working Paper 7755, June.CrossRefGoogle Scholar
Helliwell, J. (1986), ‘Supply side in the OECD's macroeconomic model’, OECD Economic Studies, 6, Spring, pp. 75–131.Google Scholar
Helliwell, J. (1987), ‘Supply oriented macroeconomics: the MACE model of Canada’, Economic Modeling, July, pp. 318–340.CrossRefGoogle Scholar
Hooker, M. (1996), ‘What happened to the oil price-macro-economy relationship’, Federal Reserve Board (FEDS) Working Paper No. 56.Google Scholar
Hooker, M. (1999), ‘Are oil shocks inflationary? Asymmetric and nonlinear specifications versus changes in regime’, Working Paper, Federal Reserve Board, December.CrossRefGoogle Scholar
Hunt, B., Isard, P. and Laxton, D. (2001), ‘The macroeconomic effects of higher oil prices’, IMF Working Paper WP/01/14.CrossRefGoogle Scholar
IMF Research Department (2000), ‘The impact of higher oil prices on the global economy’, Washington, International Monetary Fund, available at www.imf.org/external/pubs/ft/oil/2000/index.htm.Google Scholar
Isard, P. (2000), ‘The role of MULTIMOD in the IMF's policy analysis’, IMF Policy Discussion Paper PDP/00/5.Google Scholar
Isard, P., Laxton, D. and Eliasson, A. (1999), ‘Simple monetary policy rules under model uncertainty’, in Isard, P., Razin, A. and Rose, A.K. (eds), International Finance and Financial Crises: Essays in Honor of Robert P. Flood, Jr.,Washington and Boston, International Monetary Fund and Kluwer, pp. 207–250.CrossRefGoogle Scholar
Laxton, D., Isard, P., Faruqee, H., Prasad, E. and Turtelboom, B. (1998), ‘MULTIMOD Mark III: the core dynamic and steady-state models’, IMF Occasional Paper No. 164.Google Scholar
Lee, K., Ni, S. and Ratti, R. (1995), ‘Oil shocks and the macroeconomy: the role of price variability’, Energy Journal, 18, pp. 39–56.Google Scholar
Lucas, R. E. Jr. (1976), ‘Econometric policy evaluation: a critique’, in Brunner, K. and Meltzer, A.H. (eds), The Phillips Curve and Labor Markets, Carnegie-Rochester Conference Series on Public Policy, 1, Amsterdam, North Holland.Google Scholar
McKibbin, W. and Sachs, J. (1991), Global Linkages: Macroeconomic Interdependence and Cooperation in the World Economy, Washington D.C., The Brookings Institution.Google Scholar
Mork, K. (1989), ‘Oil and the macroeconomy when prices go up and down: an extension of Hamilton's results’, Journal of Political Economy, 97, pp. 740–744.CrossRefGoogle Scholar