The oil price shocks and the unit root hypothesis: the UK experience

Critics of the standard Dickey–Fuller and augmented Dickey–Fuller tests for unit roots argue that when there have been significant structural breaks during the sample period, these tests are often biased toward acceptance. Allowing for a one-time change in the slope of the trend function often leads to rejection of the unit-root hypothesis which implies that business cycles are temporary fluctuations around a stable but possibly shifting trend path. The validity of the unit root hypothesis in connection with the two oil crises in the seventies is re-examined using quarterly time-series data for a set of UK macroeconomic series. The empirical evidence presented supports the view that only those shocks associated with the oil price crises had a persistent effect on the UK economy.     

Monetary policy and the transmission of oil shocks

This paper provides evidence on the role played by monetary policy in the transmission of oil shocks to the US economy. We show that for the period since 1986, oil shocks have had a negative effect on stock returns, regardless of whether the oil shock is defined as the percentage change in the price of oil or a nonlinear transformation of that series. We then demonstrate that there is no relationship between the reaction of individual stock prices to oil shocks and to monetary policy shocks. This implies that oil shocks do have effects on the economy beyond their effect on monetary policy. We conclude that systematic monetary policy is not as effective as suggested in some previous studies.     

The effects of oil price shocks on expenditure category CPI

In this study, we apply a two-block structural vector autoregressive (VAR) model proposed by Kilian and Park (2009) in order to investigate the dynamic effects of changes in oil price on the expenditure category consumer price index (CPI) in the United States and Japan. Our results confirm that each expenditure category price index responded very differently to the same structural shock, and that whether changes in oil price function as a positive stimulus or a negative shock for the individual expenditure category prices also depends on the kind of underlying shock that drives the changes in oil price. Finally, our results also reveal that the manner in which changes in oil price affect each expenditure category price differs between the United States and Japan and these detailed-level differences may lead to aggregate-level differences in the price response of both countries to changes in oil price.     

The distributive impact of terms of trade shocks: The case of the oil price changes in Russia

The halving of oil prices, during a short period between 2014 and 2015, has generated major terms of trade losses for oil exporting countries. This terms of trade shock has economy‐wide effects and significant distributive impacts. This paper, using a macro‐micro simulation model, describes and quantifies the channels of transmission from the drop of oil prices, to changes in welfare distribution at the household level for the case of the Russian Federation. The oil price reduction generates a reverse Dutch disease impacting sectoral employment, factor returns and consumption prices. It causes a contraction of employment and wages in more skill‐intensive (non‐tradable) sectors, and a reduction in consumption prices that is more pronounced for non‐food than for food goods. When these shifts are mapped to changes in incomes at the micro level, all households are affected. Poverty rates increase by 1 to 4 percentage points, depending on the poverty line used. At the US$ 10 a day threshold, 4.1 million additional people fall into poverty. Along the consumption distribution, richer people are affected more than those in the bottom 40%. However, this minor progressive impact may be reversed due to increases in unemployment and cuts in social programmes.     

Stock price synchronicity to oil shocks across quantiles: Evidence from Chinese oil firms

This paper investigates behaviour of stock price synchronicity to oil shocks across quantiles for Chinese oil firms. The spillover effects of the oil market on a firm are segregated into firm-specific and market-wide information. First, our results report a higher level of synchronicity by dynamic conditional correlations than by R-square since the former better captures dynamic linear dependence. Second, we find strong evidence of size effect. In particular, stock price synchronicity is generally higher in large-cap firms than in small-cap ones. Oil shocks affect synchronicity in the upper quantiles differently based on firm size. Third, we also find that synchronicity responds to oil shocks significantly in extreme low quantiles, implying that shocks in the oil market are transmitted to Chinese oil firms via firm-specific information. Finally, we determine that oil shocks have little or no immediate impact on stock price synchronicity; instead, cumulative lagged effect is evident. This evidence highlights the lagging effect of spillover of oil shocks on Chinese oil firms.     

Exchange rates of oil exporting countries and global oil price shocks: a nonlinear smooth-transition approach

This paper models logistic and exponential smooth transition adjustments of real exchange rates for six major oil-exporting countries in response to different shocks affecting oil prices. The logistic form captures asymmetric and the exponential form symmetric adjustments in regards to positive and negative oil price shocks. We chose oil-exporting countries that do not peg their exchange rates. For most countries, we detect no statistically significant non-linearities for the adjustment process of real exchange rate returns, be they asymmetric or symmetric, in response to oil supply shocks, idiosyncratic oil-market-specific shocks, and speculative oil-market shocks. Exceptions are oil supply shocks in the UK and possibly Brazil, where exchange rates respond nonlinearly, though the effects are symmetric for both countries. On the other hand, global aggregate demand shocks, which are shocks not originating directly in the oil market, have nonlinear asymmetric effects on real exchange rate returns for Canada, Mexico, Norway and Russia, and nonlinear symmetric effects for Brazil and the UK.     

Macroeconomic and financial effects of oil price shocks: Evidence for the euro area

The paper investigates the macroeconomic and financial effects of oil price shocks for the euro area, with a special focus on post-2009 oil price dynamics and the recent slump. The analysis is carried out episode by episode, by means of a large-scale time-varying parameter model. We find that recessionary effects are triggered by oil price hikes and, in some cases, also by oil price slumps. In this respect, the post-2009 run-up likely contributed to sluggish growth, while uncertainty and real interest rate effects are the potential channels through which the 2014 slump has depressed aggregate demand and worsened financial conditions. Also in light of the zero interest rate policy carried out by the ECB, in so far as the Quantitative Easing policy failed to generate inflationary expectations, a more expansionary fiscal policy might be required to counteract the deflationary and recessionary threat within the expected environment of soft oil prices.     

Nonlinear effects of oil shocks on stock returns: a Markov-switching approach

Using Markov-switching models, we investigate whether oil price shocks have nonlinear effects on stock returns. Empirical evidence from a set of international stock indexes suggests that an increase in oil prices has a negative and significant impact on stock prices in one state of the economy, whereas this effect is significantly dampened in another state of the economy. Furthermore, it is shown that changes in oil prices or in oil price volatility do not lead to a higher probability of switching between regimes.     

Not all international monetary shocks are alike for the Japanese economy

This paper examines the influence of monetary aggregates shocks in the U.S., China and the Euro area on Japan. China's monetary expansion has significant effects on Japan's economy that are quite different from those of the U.S. and Euro area. In line with the implications of the Mundell–Fleming model when there are capital controls in place, Chinese monetary expansion is found to primarily affect Japan through trade. The income absorption effect of China's monetary expansion is substantial for Japan. China's monetary expansion results in significant increases in Japan's industrial production, exports and inflation, and decreases in the trade-weighted yen. After 24 months, monetary shocks in China forecast 20% of the variation in Japan's real trade balance. In contrast, U.S. monetary expansion results in contraction in Japan's industrial production, exports and trade balance (expenditure-switching). Monetary expansion in the Euro area does not significantly affect Japan. Structural vector error correction models and a factor-augmented model are estimated to establish robustness of results.     

Crude oil and BRICS stock markets under extreme shocks: New evidence

In this paper, we propose an extreme Granger causality analysis model to uncover the causal links between crude oil and BRICS stock markets. Instead of analyzing the average causal relationship, as is usually done, we first decompose the data into three cumulative components and investigate the causality between different combinations of extreme positive, extreme negative and normal shocks. These types of combinations can describe all facets of the interactions between crude oil and BRICS stock markets, especially under extreme shocks. In contrast to the results obtained by the traditional Granger causality test, our empirical findings demonstrate that the effect of oil price changes on the stock markets is stronger under extreme circumstances than under normal circumstances. Furthermore, large upward or downward oil price changes have an asymmetric impact on extreme upward or downward stock price changes. Finally, robustness checks verify the rationality and validity of the extreme Granger causality analysis.     

日本风险投资案例研究——以集富风险投资公司为例

日本作为亚洲风险投资的先驱者,其风险投资起步于20世纪60年代。运用收集到的一手资料进行案例研究,通过对日本最大的风险投资公司JAFCO的组织结构、运作及回收各个方面进行分析,以期探究JAFCO公司成功的秘笈,并对当前日本风险投资的发展研究作进一步了解。     

Can oil shocks explain asymmetries in the US Business Cycle?

We consider whether oil prices can account for business cycle asymmetries. We test for asymmetries based on the Markov switching autoregressive model popularized by Hamilton (1989), using the tests devised by Clements and Krolzig (2000). We find evidence against the conventional wisdom that recessions are more violent than expansions: while some part of the downturn in economic activity that characterises recessionary periods can be attributed to dramatic changes in the price of oil, post-War US economic growth is characterized by the steepness of expansions. First Version Received: December 2000/Final Version Received: September 2001     

Euro area,oil and global shocks: An empirical model-based analysis

We assess the impact of oil shocks on euro-area (EA) macroeconomic variables by estimating with Bayesian methods a two-country New Keynesian model of EA and rest of the world (RW). Oil price is determined according to supply and demand conditions in the world oil market. We obtain the following results. First, a 10% increase in the international price of oil generates an increase of about 0.1 annualized percentage points in EA consumer price inflation. Second, the same increase in the oil price generates a decrease in EA gross domestic product (GDP) of around 0.1% and a trade deficit, if it is due to negative oil supply or positive oil-specific demand shocks. Third, it generates a mild EA GDP increase and a trade surplus if due to a positive RW aggregate demand shock. Fourth, the increase in the oil price over the 2004–2008 period did not induce stagflationary effects on the EA economy because it was associated with positive RW aggregate demand shocks. The drop in RW aggregate demand contributes to explain the 2008 fall in oil prices, EA GDP and inflation.