Open AccessThe Indirect Effects of Oil Price on Consumption Through Assets
Author(s) -
Seyedeh Fatemeh Razmi,
Leila Torki,
Seyed Mohammad Javad Razmi,
Ehsan Mohaghegh Dowlatabadi
Publication year - 2022
Publication title -
international journal of energy economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.449
H-Index - 33
ISSN - 2146-4553
DOI - 10.32479/ijeep.12528
Subject(s) - economics , consumption (sociology) , stock (firearms) , vector autoregression , asset (computer security) , shock (circulatory) , oil price , quarter (canadian coin) , monetary economics , wealth effect , crude oil , econometrics , financial economics , monetary policy , mechanical engineering , medicine , social science , computer security , archaeology , sociology , computer science , petroleum engineering , history , engineering
This research considers how oil price can indirectly affect consumption through asset prices of stock and house. Using the theory of consumption wealth effect, this research shows that, unexpectedly, a rise in oil price would lead to increase in consumption. The research uses the data of three OECD countries of France, Canada and the United States from quarter 1st 1997 to quarter 3rd 2017 and vector autoregression model. Empirical results prove that a positive shock to oil price has a positive indirect effect on consumptions of France and Canada via both asset prices. The indirect effect of oil price on US consumption only exists through stock price. The duration of indirect effect of oil price on consumption depends on dependency of consumption to asset prices in each country.