Oil Shocks in a Global Perspective: Are they Really That Bad?

August 1, 2011

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Format: Chicago

Tobias N. Rasmussen, and Agustin Roitman. Oil Shocks in a Global Perspective: Are they Really That Bad?, (USA: International Monetary Fund, 2011) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Using a comprehensive global dataset, we outline stylized facts characterizing relationships between crude oil prices and macroeconomic developments across the world. Approaching the data from several angles, we find that the impact of higher oil prices on oil-importing economies is generally small: a 25 percent increase in oil prices typically causes GDP to fall by about half of one percent or less. While cross-country differences in impact are found to depend mainly on the relative size of oil imports, we also show that oil price shocks are not always costly for oil-importing countries: although higher oil prices increase the import bill, there are partly offsetting increases in external receipts. We provide a small open economy model illustrating the main transmission channels of oil shocks, and show how the recycling of petrodollars may mitigate the impact.

Subject: Commodities, Exports, Imports, Inflation, International trade, Oil, Oil prices, Prices

Keywords: Emerging and developing countries, Exchange rate, Exports, Global, Imports, Inflation, Oil, Oil exporter, Oil import, Oil importer, Oil importing economies, Oil price, Oil prices, Oil shock episodes, Oil-importing OECD, Recycling of petrodollars, Shock episode, Volume growth, World GDP volume, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/194
Stock No:

WPIEA2011194
ISBN:

9781462305254
ISSN:

1018-5941

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