Dear Guest! If you find an error on the page or you have any technical question please call the customer service center. Phone number is 06-80-203-776. The Central Bank of Hungary.
HU

WP 2008/5. Alessia Campolmi: Oil price shocks: Demand vs Supply in a two-country model

Print

From the last quarter of 2001 to the third quarter of 2005 the real price of oil increased by 103%. Such an increase is comparable to the one experienced during the oil shock of 1973. At the same time, the behaviour of real GDP growth, Consumer Price inflation (CPI inflation), GDP Deflator inflation, real wages and wage inflation in the U.S. in the 1970s was very different from the one exhibited in the 2000s. What can explain such a difference? Within a two-country framework where oil is used in production, two kinds of shocks are analyzed: (a) a reduction in oil supply, (b) a persistent increase in foreign productivity (as proxy for the experience of China in the last years). It is shown that, while the 1970s are consistent with a supply shock, the shock to foreign productivity generates dynamics close to the one observed in the 2000s.

JEL classification: E12, F41.
Keywords: oil price, open economy, demand and supply shocks.

This website uses cookies to provide a more convenient browsing experience. By using this website, you accept the use of cookies. Please read our Cookie Guidelines, for more information on cookies, including information on how to disable or delete them.I accept

Please be informed that our Data Protection Guidelines were changed to be compliant with data protection laws.I understand