The Role of Money Market Liquidity in Dynamics of Crude Oil Prices
The Role of Money Market Liquidity in Dynamics of Crude Oil Prices
Author(s): Sunghee ChoiSubject(s): Economy, Economic development, Transformation Period (1990 - 2010)
Published by: Reprograph
Keywords: crude oil prices; money liquidity; US M2; VIX;
Summary/Abstract: How does money market liquidity affect crude oil prices movements? This paper addresses the question by looking at liquidity from two different perspectives: safe and risky money availability. Using M2 and VIX as a proxy for each type of money liquidity, respectively, I find that risk money liquidity measured by VIX is significantly estimated to have a positive effect on the NYMEX WTI crude oil prices. Moreover, sub-period analyses show that the effect of risk money liquidity on oil price is prominently significant from 2007 to 2008, when the oil prices excessively rise and fall. These results imply that money liquidity in emerging countries is an important factor for explaining dynamics of crude oil prices especially when oil prices are turbulent.
Journal: Journal of Applied Economic Sciences (JAES)
- Issue Year: XI/2016
- Issue No: 45
- Page Range: 1265-1267
- Page Count: 3
- Language: English