Non-Linear Oil Price Dynamics: A Tale of Heterogeneous Speculators?
Version of Record online: 12 JAN 2009
© 2009 The Authors. Journal Compilation © Verein für Socialpolitik and Blackwell Publishing Ltd
German Economic Review
Volume 10, Issue 3, pages 270–283, August 2009
How to Cite
Reitz, S. and Slopek, U. (2009), Non-Linear Oil Price Dynamics: A Tale of Heterogeneous Speculators?. German Economic Review, 10: 270–283. doi: 10.1111/j.1468-0475.2008.00456.x
- Issue online: 3 JUL 2009
- Version of Record online: 12 JAN 2009
- Oil price dynamics;
- endogenous bubbles;
- STR-GARCH model
Abstract. While some of the recent surges in oil prices can be attributed to a robust global demand at a time of tight production capacities, commentators occasionally also blame the impact of speculators for part of the price pressure. We propose an empirical oil market model with heterogeneous speculators. Whereas trend-extrapolating chartists may tend to destabilize the market, fundamentalists exercise a stabilizing effect on the price dynamics. Using monthly data for West Texas Intermediate oil prices, our STR-GARCH estimates indicate that oil price cycles may indeed emerge due to the non-linear interplay between different trader types.