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Oil price dynamics, macro-finance interactions and the role of financial speculation

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  • Morana, Claudio
Abstract
What is the role of Önancial speculation in determining the real oil price? We Önd that while macroeconomic shocks have been the major upward driver of the real oil price since the mid 1980s, Önancial shocks have also sizably contributed since early 2000s, and at a much larger extent since mid 2000s. Despite Önancial shocks contributed with 44% out of the 65% real oil price increase over the period 2004-2010, the third oil price shock was a macro-Önancial episode: macroeconomic shocks actually largely accounted for the 2007-2008 oil price swing. While we then Önd support to the demand side view of real oil price determination, we also Önd a much larger role for Önancial shocks than previously noted in the literature.

Suggested Citation

  • Morana, Claudio, 2012. "Oil price dynamics, macro-finance interactions and the role of financial speculation," Conference papers 332210, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332210
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    Keywords

    Financial Economics; Resource /Energy Economics and Policy;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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