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Oil prices and global factor macroeconomic variables

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Ratti, R and Vespignani, JL (2015) Oil prices and global factor macroeconomic variables. Discussion Paper. University of Tasmania. (Submitted)

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Abstract

This paper investigates the relationship between oil prices, and global output, prices, central
bank policy interest rate and monetary aggregates with a global factor-augmented error
correction model. We confirm the following stylized relationships: i) in line with the
quantitative theory of money, at global level, money, output and prices are cointegrated; ii)
positive innovation in global oil price is connected with global interest rate tightening; iii)
positive innovation in global money, price level and output is connected with an increase in
oil prices; iv) positive innovations in global interest rate are associated with a decline in oil
prices; v) positive shocks to the trade weighted U.S. dollar are linked with reductions in oil
price; vi) the U.S., Euro area and China are the main drivers of global macroeconomic factors.

Item Type: Report (Discussion Paper)
Keywords: Global interest rate, global monetary aggregates, oil prices, GFAVEC
Publisher: University of Tasmania
Date Deposited: 15 Jan 2016 00:59
Last Modified: 15 Jan 2016 00:59
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