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Changes in the global oil market

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  • Erdenebat Bataa
  • Marwan Izzeldin
  • Denise Osborn

Abstract

Using a new iterative algorithm that tests for possible breaks in the coefficients and residual variances of recursively identified structural equations, we examine changes in the parameters of the oil market model of Kilian (2009). Our analysis reveals breaks in the coefficients of the oil production and price equations, together with volatility shifts in all equations. In particular, the medium term response of production to aggregate demand shocks increases after 1980 and the price response to supply shocks is more persistent from the mid-1990s. All variables evidence changes in the relative contributions of individual shocks to their forecast error variances.

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  • Erdenebat Bataa & Marwan Izzeldin & Denise Osborn, 2015. "Changes in the global oil market," Working Papers 75761696, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:75761696
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    3. Plakandaras, Vasilios & Gupta, Rangan & Balcilar, Mehmet & Ji, Qiang, 2022. "Evolving United States stock market volatility: The role of conventional and unconventional monetary policies," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    4. Raghavan, Mala, 2020. "An analysis of the global oil market using SVARMA models," Energy Economics, Elsevier, vol. 86(C).
    5. Lin, Boqiang & Bai, Rui, 2021. "Oil prices and economic policy uncertainty: Evidence from global, oil importers, and exporters’ perspective," Research in International Business and Finance, Elsevier, vol. 56(C).
    6. V., Ernesto Guerra & H., Eugenio Bobenrieth & H., Juan Bobenrieth & Wright, Brian D., 2023. "Endogenous thresholds in energy prices: Modeling and empirical estimation," Energy Economics, Elsevier, vol. 121(C).
    7. Hailemariam, Abebe & Smyth, Russell, 2019. "What drives volatility in natural gas prices?," Energy Economics, Elsevier, vol. 80(C), pages 731-742.
    8. Erdenebat Bataa, 2019. "Growth and Inflation Regimes in Greater Tumen Initiative Area," The Northeast Asian Economic Review, ERINA - Economic Research Institute for Northeast Asia, vol. 7(1), pages 15-29, November.
    9. Salisu, Afees A. & Pierdzioch, Christian & Gupta, Rangan, 2021. "Geopolitical risk and forecastability of tail risk in the oil market: Evidence from over a century of monthly data," Energy, Elsevier, vol. 235(C).
    10. Considine, Jennifer & Galkin, Philipp & Aldayel, Abdullah, 2022. "Inventories and the term structure of oil prices: A complex relationship," Resources Policy, Elsevier, vol. 77(C).
    11. Liu, Siyao & Fang, Wei & Gao, Xiangyun & Wang, Ze & An, Feng & Wen, Shaobo, 2020. "Self-similar behaviors in the crude oil market," Energy, Elsevier, vol. 211(C).
    12. Alomran, Abdulaziz Ahmed & Alsubaiei, Bader Jawid, 2022. "Oil price uncertainty and corporate cash holdings: Global evidence," International Review of Financial Analysis, Elsevier, vol. 81(C).
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    Keywords

    Oil price shocks; multiple breaks; breaks in SVAR;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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