Highlights :

• We show that the nature of the shock — demand-driven or supply-driven — matters in understanding the effects of oil price shocks on global imbalances.
• The main adjustment mechanism to oil shocks is based on the trade channel, which focuses on the dynamics of energy exports and imports for exporting and importing countries.
• While significant, the valuation channel — related to international capital flows linked to the increase in energy prices — is at play only on the short run.

 Abstract :
The aim of this paper is to investigate oil price shocks’ effects and their associated transmission channels on global imbalances. To this end, we rely on a Global VAR approach that allows us to account for trade and financial interdependencies between countries. Considering a sample of 30 oil-exporting and importing economies over the 1980-2011 period, we show that the nature of the shock—demand-driven or supply-driven—matters in understanding the effects of oil price shocks on global imbalances. In addition, we evidence that the main adjustment mechanism to oil shocks is based on the trade channel, the valuation channel being at play only on the short run.

 Keywords : oil prices | global imbalances | global VAR

 JEL : C32, F32, Q43