Relationship between oil prices and economic, Macroeconomics

Assignment Help:

It was observed that following a one standard deviation shock to the price of oil, interest rates rose sharply immediately afterwards reaching a maximum after two quarters. Then from this maximum point, interest rates decline steadily for the next 14 periods until the minimum point, approximately 0.5 lower than the original trend. It appears that at the point where GDP had reverted back to its original pattern, interest rates respond and start to rise. However, during the whole five year estimation, they do not revert back to their original trend. This was also the case for unemployment and exchange rates. Both variables displayed a negative response throughout the long term and did not normalise during the five year analysis.

These results reveal a great deal about the relationship between oil prices and the economy in the UK.In summary, this paper shows that there is a significant negative relationship between oil prices and economic. When oil prices increase, it is clear that it has a significant negative impact on the economy. The impact is greater than that found by Jiménez-Rodríguez, R. And Sánchez, M. (2004). The reason for this could be that during the sample period analysed in this paper, the UK became a net importer of oil, whereas in their paper, the UK was still a net exporter. The UK is faced with periods of higher inflation than normal in the immediate aftermath. Furthermore the growth rate declines by up to 2% for an extended period. The results seem to follow the theory of business cycles, which refers to economic fluctuations from periods of boom to recession typically within a three to five year period.


Related Discussions:- Relationship between oil prices and economic

Define the monopoly of central banks, Define the monopoly of Central banks ...

Define the monopoly of Central banks The central bank has a monopoly on issuing currency, it is in complete control of the monetary base. In section 7.4.2 we will describe exac

Credit multiplier, use a numerical example to illustrate how credit multipl...

use a numerical example to illustrate how credit multiplier works

Millions of americans purchase, Each day millions of Americans purchase mil...

Each day millions of Americans purchase millions of goods and services. These goods and services are generally readily available, as long as you have the necessary money to purchas

Illustrate biological effects of patulin, Q. Illustrate biological effects ...

Q. Illustrate biological effects of Patulin? Biological activity: Patulin has an acute oral LD 50 in rodents of about 30-50 mg/kg and has been shown to be teratogenic, immunot

LM-curve in the AS-AD model, The LM-curve in the AS-AD model  ...

The LM-curve in the AS-AD model  The LM-curve will shift upwards (downward) when P is increases (decreases) in the AS-AD model is moved L

Estimate the length of pipe, Engineers sometimes add chlorine to pipes to d...

Engineers sometimes add chlorine to pipes to disinfect water. It is desired to achieve four logs of kill. This means that the effluent concentration of microorganisms is 10 -4 tim

Inflation, inflation of fuel price on consumer

inflation of fuel price on consumer

MONETARY POLICY, What are the instruments of monetary policies

What are the instruments of monetary policies

solow model, critically explain solow model of economic growt

critically explain solow model of economic growth

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd