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Oil uncertainty and the price-cost markup: Evidence from U.S. data

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  • Ma, Xiaohan

Abstract

This paper investigates the implications of uncertainty in the oil and gas sector for the dynamics of the price-cost markup at the business cycle frequency. We estimate a structural VAR model using U.S. quarterly data for the period 1982q2:2018q4, and find that an increase in oil uncertainty reduces the measured price-cost markup and economic activities. This result is consistent with the prediction of a calibrated New-Keynesian model with oil uncertainty shocks. These findings also provide insights into the relevance of the markup as a transmission channel of oil uncertainty.

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  • Ma, Xiaohan, 2023. "Oil uncertainty and the price-cost markup: Evidence from U.S. data," Energy Economics, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:eneeco:v:124:y:2023:i:c:s0140988323002268
    DOI: 10.1016/j.eneco.2023.106728
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    More about this item

    Keywords

    Oil uncertainty; Price-cost markup; SVAR; New-Keynesian; U.S. data;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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