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Oil price uncertainty in Canada

  • Elder, John
  • Serletis, Apostolos

Bernanke [Bernanke, Ben S. Irreversibility, uncertainty, and cyclical investment. Quarterly Journal of Economics 98 (1983), 85-106.] shows how uncertainty about energy prices may induce optimizing firms to postpone investment decisions, thereby leading to a decline in aggregate output. Elder and Serletis (Elder, John and Serletis, Apostolos. Oil price uncertainty. http://ssrn.com/abstract=908675 (2009).] find empirical evidence that uncertainty about oil prices has tended to depress investment in the United States. In this paper we assess the robustness of these results by investigating the effects of oil price uncertainty in Canada. Our results are remarkably similar to existing results for the United States, providing additional evidence that uncertainty about oil prices may provide another explanation for why the sharp oil price declines of 1985 failed to produce rapid output growth. Impulse-response analysis suggests that uncertainty about oil prices may tend to reinforce the negative response of output to positive oil shocks.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 31 (2009)
Issue (Month): 6 (November)
Pages: 852-856

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Handle: RePEc:eee:eneeco:v:31:y:2009:i:6:p:852-856
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  11. John Elder & Peter E. Kennedy, 2001. "Testing for Unit Roots: What Should Students Be Taught?," The Journal of Economic Education, Taylor & Francis Journals, vol. 32(2), pages 137-146, January.
  12. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April.
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