The oil price-macroeconomy relationship since the mid-1980s: A global perspective31-07-2014
We investigate the oil price-macroeconomy relationship from a global perspective, by means of a large scale macro-ﬁnancial-econometric model. In addition to real activity, we consider ﬁscal and monetary policy responses and labor and ﬁnancial markets conditions, in order to provide a comprehensive account of the macro-ﬁnancial effects of oil price shocks. We ﬁnd that oil market supply side, speculative, preferences, and volatility shocks exercised recessionary effects during the ﬁrst and second Persian Gulf War and 2008 oil price episodes.
As long as oil supply will keep expanding at a slower pace than required by demand conditions, and in so far as the recently passed regulatory provisions aimed at controlling ﬁnancial speculation in the oil (and other commodities) futures market will prove unsuccessful, a recessionary bias, determined by higher and more uncertain real oil prices, may then be expected to persist also in the near future.