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Oil 102507

Oil 102507

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Published by api-3828752

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Published by: api-3828752 on Oct 18, 2008
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03/18/2014

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Factors Affecting OIL Prices
\u2022
Economic Growth
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Exchange Rates
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Inventories
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Marginal Producers
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Lack of Investment
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Violence in the Middle east
Emerging Concepts
The Oil Gauge Model
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To assess the response of activity and inflation to higher oil prices
\u2022
This model examines the impact of oil prices on inflation by looking both at
the long-run positive correlation between inflation and growth, as well as on
the asymmetric impact of oil prices on activity.
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net oil price Increase is used which is real (inflation-
adjusted)
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With the use of a VAR methodology, impulse response functions of
real activity and inflation to a 10% increase in the price of oil is
derived.
\u2022

Our Oil gauge Model finds that a 10% increase in the price of oil shaves G7 real GDP by 0.15% in the first year and 0.30% over two years. The response of inflation to an oil price increase of 10% is 0.26% in the first year and 0.45% over two years. These estimates suggest that the developed economies have become better

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