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The macroeconomic effects of oil price shocks: Evidence from a statistical identification approach

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  • Herwartz, Helmut
  • Plödt, Martin

Abstract

We analyze the dynamics in the global crude oil market based on a structural vector autoregressive model. We identify the model by presuming that reduced form residuals can be traced back to structural shocks that are independently distributed over the cross equation dimension. The resulting point estimates of the impulse response functions allow for a direct comparison with the outcomes of more conventional identification approaches. Our results are remarkably similar to the results regarding oil market dynamics in Kilian and Murphy (2012) and Inoue and Kilian (2013) even though they rely on statistical arguments instead of a set of theory-based a priori restrictions. Based on the results from our statistical approach, we investigate the cumulative contributions of different oil shocks on the rapid fall in oil prices at the end of 2008 and 2014, as well as the effects of different oil shocks on macroeconomic aggregates in the US, the euro area, and China.

Suggested Citation

  • Herwartz, Helmut & Plödt, Martin, 2016. "The macroeconomic effects of oil price shocks: Evidence from a statistical identification approach," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 30-44.
    • Handle: RePEc:eee:jimfin:v:61:y:2016:i:c:p:30-44
    DOI: 10.1016/j.jimonfin.2015.11.001
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    1. Kilian, Lutz & Demiroglu, Ufuk, 2000. "Residual-Based Tests for Normality in Autoregressions: Asymptotic Theory and Simulation Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 40-50, January.
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    6. Lutz Kilian, 2016. "The Impact of the Shale Oil Revolution on U.S. Oil and Gasoline Prices," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 185-205.
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    More about this item

    Keywords

    Vector autoregression; Identification; Global oil market;
    All these keywords.

    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
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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