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The time varying effect of oil price shocks on euro-area exports

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  • Riggi, Marianna
  • Venditti, Fabrizio

Abstract

In this paper we provide novel evidence on changes in the relationship between the real price of oil and real exports in the euro area. By combining robust predictions on the sign of the impulse responses obtained from a theoretical model with restrictions on the slope of the oil demand and oil supply curves, we identify oil supply and foreign productivity shocks in a time varying VAR with stochastic volatility. We find that from the 1980s onwards the relationship between oil prices and euro area exports has become less negative conditional on oil supply shortfalls and more positive conditional on foreign productivity shocks. Using the theoretical model we show that our empirical findings can be accounted for by (i) stronger trade relationship between the euro area and emerging economies (ii) a decrease in the share of oil in production and (iii) increased competitive pressures in the product market.

Suggested Citation

  • Riggi, Marianna & Venditti, Fabrizio, 2015. "The time varying effect of oil price shocks on euro-area exports," Journal of Economic Dynamics and Control, Elsevier, vol. 59(C), pages 75-94.
  • Handle: RePEc:eee:dyncon:v:59:y:2015:i:c:p:75-94
    DOI: 10.1016/j.jedc.2015.07.002
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    Cited by:

    1. repec:vrs:reoecp:v:17:y:2017:i:4:p:399-423:n:4 is not listed on IDEAS
    2. Bosupeng, Mpho, 2017. "Electricity Consumption and Exports Growth: Revisiting the Feedback Hypothesis," MPRA Paper 81756, University Library of Munich, Germany, revised 2017.
    3. repec:eee:joecas:v:16:y:2017:i:c:p:12-25 is not listed on IDEAS
    4. repec:gam:jeners:v:11:y:2018:i:5:p:1207-:d:145404 is not listed on IDEAS
    5. repec:eee:ecolet:v:159:y:2017:i:c:p:208-213 is not listed on IDEAS
    6. César Castro & Rebeca Jiménez-Rodríguez & Pilar Poncela & Eva Senra, 2017. "A new look at oil price pass-through into inflation: evidence from disaggregated European data," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 34(1), pages 55-82, April.
    7. Rajmund Mirdala & Júlia Ďurčová, 2016. "Priepustnosť menových kurzov nových členských krajín Európskej unie
      [Exchange Rate Pass-Through to Domestic Prices in New EU Member Countries]
      ," Politická ekonomie, University of Economics, Prague, vol. 2016(4), pages 377-404.
    8. repec:eee:eneeco:v:72:y:2018:i:c:p:177-187 is not listed on IDEAS
    9. repec:eee:energy:v:149:y:2018:i:c:p:424-437 is not listed on IDEAS

    More about this item

    Keywords

    Oil prices; VAR; Time-varying parameters; Exports;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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