Journal article
Expectations, target zones, and oil price dynamics
Journal of policy modeling, v 17(6), pp 597-613
01 Dec 1995
Abstract
Inventory shocks and market expectations in OPEC's oil pricing mechanism are incorporated and the target zone and speculative attack literatures to oil price dynamics are applied. The oil price behavior in the 2-sided target zone model and the asymmetric tolerance zone model is examined. The focus is on the characteristics of the smooth-pasting and speculative-attack solutions that are associated with credible and noncredible intervention policies. It is shown that credibility of OPEC's intervention policy declines as its output ceiling is reduced to a low level, which makes the price vulnerable to speculative attacks, and increases as the ceiling rises. The credibility is directly related to sensitivity of the market price to changes in the output and the sensitivity of its price to changes in the price expectations, and is inversely related to the positive intertemporal bias in the size the random shocks in the quantity.
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Details
- Title
- Expectations, target zones, and oil price dynamics
- Creators
- Shawkat Hammoudeh - Drexel UniversityVibhas Madan - Drexel University
- Publication Details
- Journal of policy modeling, v 17(6), pp 597-613
- Publisher
- Elsevier Sequoia S.A
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics); Bennett S. LeBow College of Business
- Web of Science ID
- WOS:A1995TL78900004
- Scopus ID
- 2-s2.0-2242478865
- Other Identifier
- 991019173981104721
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Web of Science research areas
- Economics