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The Effects of Oil Price Changes on the Industry-Level Production and Prices in the U.S. and Japan

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  • Ichiro Fukunaga
  • Naohisa Hirakata
  • Nao Sudo

Abstract

In this paper, we decompose oil price changes into their component parts following Kilian (2009) and estimate the dynamic effects of each component on industry-level production and prices in the U.S. and Japan using identified VAR models. The way oil price changes affect each industry depends on what kind of underlying shock drives oil price changes as well as on industry characteristics. Unexpected disruptions of oil supply act mainly as negative supply shocks for oil-intensive industries and act mainly as negative demand shocks for less oil-intensive industries. For most industries in the U.S., shocks to the global demand for all industrial commodities act mainly as positive demand shocks, and demand shocks that are specific to the global oil market act mainly as negative supply shocks. In Japan, the oil-specific demand shocks as well as the global demand shocks act mainly as positive demand shocks for many industries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15791.

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Date of creation: Mar 2010
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Publication status: published as The Effects of Oil Price Changes on the Industry-Level Production and Prices in the United States and Japan , Ichiro Fukunaga, Naohisa Hirakata, Nao Sudo. in Commodity Prices and Markets, East Asia Seminar on Economics, Volume 20 , Ito and Rose. 2011
Handle: RePEc:nbr:nberwo:15791

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  1. Kilian, Lutz, 2006. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5994, C.E.P.R. Discussion Papers.
  2. Blanchard, Olivier J & Galí, Jordi, 2008. "The Macroeconomic Effects of Oil Shocks: Why are the 2000s so Different from the 1970s?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6631, C.E.P.R. Discussion Papers.
  3. Goldberg, Pinelopi Koujianou, 1998. "The Effects of the Corporate Average Fuel Efficiency Standards in the US," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 46(1), pages 1-33, March.
  4. Kilian, Lutz & Park, Cheolbeom, 2007. "The Impact of Oil Price Shocks on the U.S. Stock Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6166, C.E.P.R. Discussion Papers.
  5. Naohisa Hirakata & Nao Sudo, 2009. "Accounting for Oil Price Variation and Weakening Impact of the Oil Crisis," IMES Discussion Paper Series, Institute for Monetary and Economic Studies, Bank of Japan 09-E-01, Institute for Monetary and Economic Studies, Bank of Japan.
  6. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, Elsevier, vol. 38(2), pages 215-220, October.
  7. Davis, Steven J. & Haltiwanger, John, 2001. "Sectoral job creation and destruction responses to oil price changes," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(3), pages 465-512, December.
  8. Julio J. Rotemberg & Michael Woodford, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," NBER Working Papers, National Bureau of Economic Research, Inc 5634, National Bureau of Economic Research, Inc.
  9. Lee, Kiseok & Ni, Shawn, 2002. "On the dynamic effects of oil price shocks: a study using industry level data," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(4), pages 823-852, May.
  10. Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 46(4), pages 871-909, December.
  11. Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 593-617, June.
  12. Bresnahan, Timothy F & Ramey, Valerie A, 1993. "Segment Shifts and Capacity Utilization in the U.S. Automobile Industry," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 213-18, May.
  13. Abeysinghe, Tilak, 2001. "Estimation of direct and indirect impact of oil price on growth," Economics Letters, Elsevier, Elsevier, vol. 73(2), pages 147-153, November.
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Cited by:
  1. Rigoberto Ariel Yépez-Garcia & Julie Dana, 2012. "Mitigating Vulnerability to High and Volatile Oil Prices : Power Sector Experience in Latin America and the Caribbean," World Bank Publications, The World Bank, The World Bank, number 9341, February.
  2. Paula, Georg, 2011. "Three Empirical Essays in Economics Using Firm Level Panel Data," Munich Dissertations in Economics, University of Munich, Department of Economics 13839, University of Munich, Department of Economics.
  3. Vespignani, Joaquin L. & Knop, Stephen J, 2014. "The sectorial impact of commodity price shocks in Australia," MPRA Paper, University Library of Munich, Germany 55435, University Library of Munich, Germany.
  4. Lee, Kiseok & Kang, Wensheng & Ratti, Ronald A., 2010. "Oil Price Shocks, Firm Uncertainty and Investment," MPRA Paper, University Library of Munich, Germany 49044, University Library of Munich, Germany.
  5. Elstner, Steffen, 2012. "Uncertainty, heterogeneous expectation errors and economic activity: evidence from business survey data," Munich Dissertations in Economics, University of Munich, Department of Economics 14037, University of Munich, Department of Economics.
  6. Rigoberto Ariel Yépez-García & Luis San Vicente Portes & Luis Enrique García, 2013. "Planning for Higher Oil Prices : Power Sector Impact in Latin America and the Caribbean," World Bank Other Operational Studies, The World Bank 17547, The World Bank.
  7. Kai Carstensen & Steffen Elstner & Georg Paula, 2011. "How Strongly Did the 2007/08 Oil Price Hike Contribute to the Subsequent Recession?," CESifo Working Paper Series, CESifo Group Munich 3357, CESifo Group Munich.
  8. Valcarcel, Victor J. & Wohar, Mark E., 2013. "Changes in the oil price-inflation pass-through," Journal of Economics and Business, Elsevier, Elsevier, vol. 68(C), pages 24-42.

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