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http://hdl.handle.net/10419/37094
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| Title: | | The relationship between oil prices and long-term interest rates  |
| Authors: | | Reicher, Christopher Phillip Utlaut, Johannes Friederich |
| Issue Date: | | 2010 |
| Series/Report no.: | | Kiel working paper 1637 |
| Abstract: | | We estimate a seven-variable-VAR for the U.S. economy on postwar data using long-run restrictions, taking changes in long-run interest rates and inflation expectations into account. We find a strong connection between oil prices and long-run nominal interest rates which has lasted throughout the entire postwar period. We find that a simple off-the-shelf theoretical model of oil prices and monetary policy, where oil prices are flexible and other prices are sticky, in fact predicts a strong relationship if inflation and oil prices were driven by monetary policy. The observed magnitude of this relationship is still a bit of a puzzle, but this finding does call into question the identification techniques commonly used to identify oil shocks. |
| Subjects: | | Oil shocks interest rates inflation |
| JEL: | | E31 E58 N50 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Kieler Arbeitspapiere, IfW
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