The role of higher oil prices: A case of major developed countries

Date

2008

Authors

O'Neill, Terence
Penm, Jack HW
Terrell, Richard

Journal Title

Journal ISSN

Volume Title

Publisher

Emerald Group Publishing Ltd

Abstract

The primary aim of this chapter is to examine whether the recent increase in world oil prices has affected inflation expectations and stock market returns in major OECD countries. The key findings are as follows. First, we found no evidence to support the presence of a long term relationship between oil prices and inflation expectations - measured by the difference between yields of inflation indexed and non-inflation indexed government bonds - over the sample between early 2003 and late 2006. Second, higher oil prices are found to lead to expectations of higher inflation. This evidence is stronger over the period where oil prices had been higher and signs of capacity constraints in the economy were emerging. Third, the impact of higher oil prices on stock market returns differs among countries. While higher oil prices are found to adversely affect stock market returns in the United States, the United Kingdom and France, the effects are positive in Canada and Australia as these countries are significant exporters of energy resources.

Description

Keywords

Citation

Source

Type

Book chapter

Book Title

Research In Finance Volume 24

Entity type

Access Statement

License Rights

DOI

10.1016/S0196-3821(07)00211-0

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