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The impact of monetary policy on oil process parameters and market expectations

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  • Askari, Hossein
  • Krichene, Noureddine

Abstract

Following record low interest rates and a depreciating US dollar, crude oil prices came under increasing pressure during the period 2003M5-2007M10. Oil price process parameters changed dramatically toward consistently rising prices. Short-term forecasting implied the persistence of the observed trend, as market fundamentals and underlying monetary policy were supportive of these trends. Market expectations derived from option prices anticipated further surge in oil prices and indicated a significant probability of right tail events. A tightening of monetary policy may be essential for restoring stability to oil markets and in turn for sustained economic growth.

Suggested Citation

  • Askari, Hossein & Krichene, Noureddine, 2010. "The impact of monetary policy on oil process parameters and market expectations," Global Finance Journal, Elsevier, vol. 21(2), pages 186-200.
    • Handle: RePEc:eee:glofin:v:21:y:2010:i:2:p:186-200
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    Cited by:

    1. Sepehr Ramyar & Farhad Kianfar, 2019. "Forecasting Crude Oil Prices: A Comparison Between Artificial Neural Networks and Vector Autoregressive Models," Computational Economics, Springer;Society for Computational Economics, vol. 53(2), pages 743-761, February.

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