On the influence of oil prices on economic activity and other macroeconomic and financial variables*

Abstract

Abstract The aim of this paper is to investigate the links between oil prices and various macroeconomic and financial variables for a large set of countries, including both oil‐importing and oil‐exporting countries. Both short‐run and long‐run interactions are analysed through the implementation of Granger‐causality tests, evaluation of cross correlations between the cyclical components of the series in order to identify lead/lag relationships and cointegration analysis. Our results highlight the existence of various relationships between oil prices and macroeconomic variables and, especially, an important link between oil and share prices on the short run. Turning to the long run, numerous long‐term relationships are detected, the Granger‐causality generally running from oil prices to the other variables. An important conclusion is relating to the key role played by the oil market on stock markets.