On the Sources and Consequences of Oil Price Shocks : The Role of Storage
AbstractBuilding on recent work on the role of speculation and inventories in oil markets, we embed a competitive oil storage model within a DSGE model of the U.S. economy. This enables us to formally analyze the impact of a (speculative) storage demand shock and to assess how the effects of various demand and supply shocks change in the presence of oil storage facility. We ?nd that business-cycle driven oil demand shocks are the most important drivers of U.S. oil price ?uctuations during 1982-2007. Disregarding the storage facility in the model causes a considerable upward bias in the estimated role of oil supply shocks in driving oil price ?uctuations. Our results also confirm that a change in the composition of shocks helps explain the resilience of the macroeconomic environment to the oil price surge after 2003. Finally, speculative storage is shown to have a mitigating or amplifying role depending on the nature of the shock.
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Bibliographic InfoPaper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1230.
Date of creation: 2012
Date of revision:
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oil storage; oil price fluctuations; oil demand and oil supply shocks; speculative oil demand; sticky-price DSGE models;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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- Yusuf Soner Baskaya & Timur Hulagu & Hande Kucuk, 2013.
"Oil Price Uncertainty in a Small Open Economy,"
1309, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Rizvanoghlu, Islam, 2011. "Oil Price Shocks and Macroeconomy: The Role for Precautionary Demand and Storage," MPRA Paper 42351, University Library of Munich, Germany, revised 01 Jun 2012.
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