Thesis abstract

While the oil price shocks of 1970s can be explained by pure supply factors, starting in the 1980s oil prices increasingly began to come under a different type of pressure. Oil prices accelerated from about $35/barrel in 1981 to beyond $111/barrel in 2011. At the same time interest rates subsided from 16.7 percent per annum to about 0.1. This thesis explains how this long-term price increase was, in most cases, caused by expansionary monetary policies that heightened oil prices through interest rate channels. Aggressive monetary policies stimulated oil demand and blew up oil prices, a trend that led to slower economic growth.