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Title:Monetary effects on oil and gold prices PDF Logo
Authors:Gillman, Max
Nakov, Anton
Issue Date:2008
Series/Report no.:Cardiff Economics Working Papers E2008/15
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.
Subjects:oil prices
inflation
cash-in-advance
multiple structural breaks
Granger causality
JEL:E31
E4
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers

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