The Effects of Oil Price Uncertainty on the Macroeconomy
AbstractThis paper investigates the effect of oil price uncertainty on real economic activity using a quarterly VAR with stochastic volatility in mean. Stochastic volatility allows oil price uncertainty to vary separately from changes in the level of oil prices, and thus the impact of oil price uncertainty can be examined in a more flexible yet tractable way. In addition, this paper substantially improves on the recovery of a historical uncertainty series by incorporating an additional uncertainty indicator, i.e., a realized volatility series from daily oil price data, into the estimation process. The estimation results show that an oil price uncertainty shock alone has negative effects on world industrial production.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 12-40.
Length: 45 pages
Date of creation: 2012
Date of revision:
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Business fluctuations and cycles; Econometric and statistical methods;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
- NEP-CWA-2013-01-07 (Central & Western Asia)
- NEP-ENE-2013-01-07 (Energy Economics)
- NEP-MAC-2013-01-07 (Macroeconomics)
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