## Oil Prices and the Global Economy: Is It Different This Time Around?

_IMF Working Papers, November 8, 2016_

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## Bibliographic details
- Authors: Kamiar Mohaddes, M. Hashem Pesaran
- Published: November 8, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475552034.001

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### Summary findings from the multi-country econometric model
- A fall in oil prices tends relatively quickly to lower interest rates in most countries.
- A fall in oil prices tends relatively quickly to lower inflation in most countries.
- A fall in oil prices tends relatively quickly to increase global real equity prices.
- Effects on real output are positive, but take longer to materialize (around four quarters after the shock).
- Overall conclusion: oil markets equilibrate but rather slowly, with large episodic swings between low and high oil prices.

### U.S. economy — monthly evidence and relationships
- Re-examination uses monthly observations on real oil prices, real equity prices, and real dividends.
- Confirms a perverse positive relationship between oil and equity prices over the period since the 2008 financial crisis (as highlighted in recent literature).
- Finds this positive oil–equity relationship to be unstable when considered over the longer time period of 1946–2016.
- Finds a stable negative relationship between oil prices and real dividends over the sample; real dividends are argued to be a better proxy for economic activity than equity prices.

### Supply-side effects across oil producers
- Effects of lower oil prices differ widely across different oil producers.
- Initial effects could be perverse in some major oil producers, as they may try to compensate revenue losses by raising production.

### Market dynamics and adjustment
- Demand and supply adjustments to oil price changes taken together imply slow equilibration of oil markets.
- Oil markets exhibit large episodic swings between low and high oil prices.

### Publication and metadata
- Pages: 28
- Volume: 2016
- Issue: 210
- Series: Working Paper No. 2016/210
- DOI: https://doi.org/10.5089/9781475552034.001
- Stock No: WPIEA2016210
- ISBN: 9781475552034
- ISSN: 1018-5941

*Kamiar Mohaddes and M. Hashem Pesaran, "Oil Prices and the Global Economy: Is It Different This Time Around?", IMF Working Paper No. 2016/210 (November 8, 2016).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/oil-prices-and-the-global-economy-is-it-different-this-time-around-44377_