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Monetary Policy and Crude Oil

Prices, Production and Consumption

Basil Oberholzer

The global crude oil market is critically important in many respects. It is the fuel that drives the global economy and, as such, is the focus of climate policies. Moreover, crude oil is the basis of a tradable financial asset. It is therefore connected to several outstanding macroeconomic developments of recent years, including financial market fluctuations, the financial crisis and the exceptional conduct of monetary policy. This book investigates the impacts of monetary policy and the financial system on the global crude oil market. Furthermore, it outlines how monetary policy may also be used to guarantee stability and to contribute to ecological sustainability.
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Chapter 4: Empirical evidence: monetary policy impacts on oil market variables

Prices, Production and Consumption

Basil Oberholzer

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To begin with the empirical investigation in this chapter, the theoretical conclusions are summarized in a stock-flow consistent model, which is able to integrate the oil spot and futures markets and to reflect the dynamic effects of monetary policy. Subsequently, the two respective periods of conventional and unconventional monetary policy in the time frame of consideration (2000–14) are analyzed by means of structural VARs and a large number of Granger causality tests. These methods are supplemented by a new approach to oil inventories. All in all, despite many difficulties, the causal chain from monetary policy to changes in oil production and consumption can be broadly confirmed.

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