Oil prices and global factor macroeconomic variables |
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| Affiliation: | 1. Western Sydney University, School of Business, Australia;2. Centre for Applied Macroeconomic Analysis, Australia;3. University of Tasmania, Tasmanian School of Business and Economics, Australia;4. Globalization & Monetary Policy Institute, Federal Reserve Bank of Dallas, USA |
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| Abstract: | This paper investigates the relationship between oil prices, global industrial production, prices, central bank policy interest rate and monetary aggregate with a global factor-augmented error correction model. We confirm the following stylized relationships: i) at global level, money, industrial production and prices are cointegrated; ii) positive innovation in global oil price is connected with global interest rate tightening; iii) positive innovation in global money, price level and industrial production is connected with an increase in oil prices; iv) positive innovations in global interest rate are associated with a decline in oil prices; and v) the U.S., Euro area and China are the main drivers of global macroeconomic factors. |
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