Reconsidering the macroeconomics of the oil price in Germany: testing for causality in the frequency domain |
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Authors: | Marc Gronwald |
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Institution: | (1) Department of Economics, Hamburg University, Von Melle Park 5, 20146 Hamburg, Germany |
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Abstract: | This paper reconsiders the macroeconomics of the oil price for Germany. It investigates whether causality between the oil
price and a selection of both macroeconomic and financial market variables differs between frequency bands. Both a bivariate
frequency-wise causality measure and its higher-dimensional extension are applied. The main findings are that short-run causality
exists between the oil price and variables such as short-term interest rates and the German share price index, while long-run
causality is found between the oil price and long-term interest rates. Moreover, the oil price predicts the consumer price
index at a high number of different frequencies, while no significant causality is found to run from the oil price to industrial
production and the unemployment rate.
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Keywords: | Oil price Causality Frequency domain Spectral analysis Vector autoregressions |
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