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Following record low interest rates and fast depreciating U.S. dollar, crude oil prices became under rising pressure and seemed boundless. Oil price process parameters changed drastically in 2003M5-2007M10 toward consistently rising prices. Short-term forecasting would imply persistence of observed trends, as market fundamentals and underlying monetary policies were supportive of these trends. Market expectations derived from option prices anticipated further surge in oil prices and allowed significant probability for right tail events. Given explosive trends in other commodities prices, depreciating currencies, and weakening financial conditions, recent trends in oil prices might not persist further without triggering world economic recession, regressive oil supply, as oil producers became wary about inflation. Restoring stable oil markets, through restraining monetary policy, is essential for durable growth and price stability.

Petroleum products --- Prices --- Forecasting. --- Mazut --- Petroleum --- Hydraulic fluids --- Refining --- Investments: Energy --- Inflation --- Macroeconomics --- Energy: Demand and Supply --- Price Level --- Deflation --- Energy: General --- Commodity Markets --- Investment & securities --- Oil prices --- Asset prices --- Oil --- Commodity prices --- Petroleum industry and trade --- United States

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This paper documents the extent of financial linkages between Canada and the United States and explores the impact of changes in U.S. financial conditions on financial conditions and real economic activity in Canada. It shows that close to a quarter of financing by Canadian corporations is raised south of the border. Empirical analysis using structural vector autoregressions establishes that a tightening in U.S. financial conditions has significant implications for real activity in Canada. For example, a percentage point increase in the 3- month T-bill rate, other things being equal, leads to a decline of slightly more than one percentage point in Canada's real GDP growth after 3 quarters. That decline can be decomposed into three channels: the direct financial channel, where the slowdown is attributed to a rising cost of funds for Canadian companies raising capital in the United States; the indirect financial channel, where growth is hampered as financial conditions in Canada tighten in response to a tightening in the United States; and the trade channel, which goes through a slowing in the U.S. economy, and correspondently lower demand for Canadian exports. As would be expected from the high degree of reliance on U.S. financing, the direct financial channel proves dominant in the short term.

Canada --- United States --- Foreign economic relations --- Economic conditions --- Econometric models. --- Foreign Exchange --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Macroeconomics: Production --- Energy: Demand and Supply --- Prices --- Currency --- Foreign exchange --- Production growth --- Exchange rates --- Asset prices --- Oil prices --- Production --- Economic theory

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Questions about external competitiveness, exchange rate misalignment, and the appropriate exchange rate policy feature prominently in the Russian policy debate. This paper furthers the debate by estimating empirically Russia's equilibrium real exchange rate (ERER)-that is, the rate consistent with the long-run economic fundamentals-and sheds light on the extent to which exchange rate policy should be changed. The paper confirms that the ERER reflects both productivity and the terms of trade. It suggests that Russia should target a significant medium-term current account deterioration and a real appreciation perhaps exceeding 10 percent. However, this latter number remains very sensitive to the assumed long-run oil prices.

Foreign Exchange --- Macroeconomics --- Production and Operations Management --- Energy: Demand and Supply --- Prices --- Macroeconomics: Production --- Currency --- Foreign exchange --- Oil prices --- Productivity --- Real effective exchange rates --- Exchange rates --- Real exchange rates --- Production --- Industrial productivity --- Russian Federation

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The euro area continues to perform well, owing to its sustained employment creation, rising disposable income, buoyant internal demand, and low inflation. Executive Directors agreed that favorable external developments and sound macroeconomic fundamentals had produced robust area-wide growth. They cautioned that high oil prices and a weak euro might undermine prevailing wage moderation and set in motion domestic inflation pressures. They emphasized the need to tighten monetary and fiscal policies, and accelerate structural reforms to sustain economic growth.

Foreign Exchange --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Fiscal Policy --- Energy: Demand and Supply --- Prices --- Currency --- Foreign exchange --- Fiscal stance --- Oil prices --- Price stabilization --- Exchange rates --- Fiscal policy --- Consumer prices --- Government policy --- United States

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This paper reviews the historical background of fuel subsidies in Trinidad and Tobago, discusses their fiscal impact and the inflationary impact of subsidy reform, summarizes the regressive distribution of subsidy benefits, focuses on the negative externalities caused by fuel subsidies and the environmental and traffic benefits of phasing them out, and discusses key factors contributing to successful reforms. Fuel subsidies in Trinidad and Tobago, established in 1974, increased dramatically owing to rising global crude oil price in the past few years and led to a growing debate on the costs and benefits of subsidy reform. Fuel subsidies have significantly contributed to the country’s procyclical fiscal stance.

Macroeconomics --- Public Finance --- Energy: Demand and Supply --- Prices --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- Energy industries & utilities --- Energy subsidies --- Fuel prices --- Oil prices --- Income --- Consumption --- Expenditure --- National accounts --- Expenditures, Public --- Economics --- Trinidad and Tobago