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The Macroeconomic Effects of Higher Oil Prices
Author:
Mr. Peter Isard
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Mr. Benjamin L Hunt
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Mr. Douglas Laxton
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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 014
Language:
English
Publication Date:
01 Feb 2001
DOI:
https://doi.org/10.5089/9781451843125.001
ISBN:
9781451843125
ISSN:
1018-5941
Pages:
46
Keywords:
WP; oil price; nominal interest rate; oil-price shock; price nexus; core inflation effect; oil price shocks; MULTIMOD; monetary policy; increase series; aggregate absorption price deflator; oil-price effects; oil price increase series; shock pass; oil price change; MULTIMOD input cost; oil price decrease; inflation expectation; price behavior; Oil prices; Inflation; Inflation targeting; Deflation; Consumer price indexes; Global
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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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The paper uses MULTIMOD to analyze 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, a possible explanation of the asymmetric relationship between oil prices and economic activity, the role of monetary policy credibility, the implications of delayed policy responses, and the relative merits of leaning in different directions when the correct policy response is uncertain.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund