Don’t Lower Oil Prices Boost Global Growth?

The press release accompanying the World Bank’s latest Global Economic Prospects partly blames “falling commodity prices” for “sapp[ing] economic activity,” leaving 2015 global economic growth “less than expected.”

Though this may chime with popular sentiment – that everything, whether it is oil prices or growth forecasts, is heading south together – it actually flies in the face of orthodox economic thinking. This has it that consuming countries are more likely to boost spending in response to lower prices than producing countries are to cut, and thus that falls in the price of oil and other commodities should provide an overall boost to global economic growth at least in the short term.


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