Monetary effects on nominal oil prices

Gillman, Max and Nakov, Anton 2009. Monetary effects on nominal oil prices. North American Journal of Economics and Finance 20 (3) , pp. 239-254. 10.1016/j.najef.2009.11.001

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Abstract

The paper presents a theory of nominal asset prices for competitively owned oil. Focusing on monetary effects, with flexible oil prices the US dollar oil price should follow the aggregate US price level. But with rigid nominal oil prices, the nominal oil price jumps proportionally to nominal interest rate increases. We find evidence for structural breaks in the nominal oil price that are used to illustrate the theory of oil price jumps. The evidence also indicates strong Granger causality of the oil price by US inflation as is consistent with the theory.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HF Commerce H Social Sciences > HG Finance J Political Science > JK Political institutions (United States)
Uncontrolled Keywords:	Oil prices ; Inflation ; Cash-in-advance ; Multiple structural breaks ; Granger causality
Publisher:	Elsevier
ISSN:	1062-9408
Last Modified:	19 Mar 2016 22:32
URI:	https://orca.cardiff.ac.uk/id/eprint/19577

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