Macroeconomic effects of precautionary demand for oil
AbstractWe evaluate the macroeconomic effects of shocks specific to the oil market, which mainly reflect fluctuations in precautionary demand for oil driven by uncertainty about future supplies. A two-stage identification procedure is used. First, daily changes in the futures-spot spread proxy for precautionary demand shocks and the path of oil prices is estimated. This information is then exploited to restrict the oil price response in a VAR. Impulse responses suggest that such shocks reduce output and raise prices. Historical decomposition shows that they contributed significantly to the U.S. recessions in the 1990s and in the early 2000s, but not to the most recent slump.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 918.
Date of creation: Jul 2013
Date of revision:
Vector autoregression; Oil shock; Futures; News.;
Find related papers by JEL classification:
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-20 (All new papers)
- NEP-ENE-2013-07-20 (Energy Economics)
- NEP-MAC-2013-07-20 (Macroeconomics)
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