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The Differential Effects of Oil Demand and Supply Shocks on the Global Economy
Author:
Mr. Paul Cashin
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Mr. Kamiar Mohaddes null

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Mr. Mehdi Raissi
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Maziar Raissi null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 253
Language:
English
Publication Date:
23 Oct 2012
DOI:
https://doi.org/10.5089/9781475597158.001
ISBN:
9781475597158
ISSN:
1018-5941
Pages:
41
Keywords:
WP; Global VAR (GVAR); interconnectedness; global macroeconomic modeling; impulse responses; international business cycle; oil-demand and oil-supply shocks; oil exporter; oil-price shock; oil price; shock result; error correction term; Oil; Oil prices; Vector autoregression; Oil production; Real effective exchange rates; Global; Middle East; Africa; North Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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 1979Q2–2011Q2, 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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund