IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

U.S. petroleum consumption behavior and oil price uncertainty: Tests of cointegration and parameter instability

  • A. Arize
Registered author(s):

    This study utilizes cointegration theory to correctly characterize U.S. petroleum consumption behavior. Initial estimates show the absence of any long-run, unique relationship among petroleum consumption, real income, and relative prices. However, the introduction of oil price uncertainty into this relationship shows the presence of a cointegrating relationship. Oil price uncertainty was introduced in two ways, namely, as an exogenous I(1) variable and as a regressand. Estimates of the cointegrating relationship are obtained using a variety of techniques such as the Johansen system, the Phillips-Hansen, the Stock-Watson, the Park canonical cointegrating regression, the Phillips spectral, and the Engle-Granger test procedures. Parameter instability of the cointegrating relationship is tested using methods discussed in Hansen [1992] and Hansen and Johansen [1993]. While previous studies in this literature have yielded mixed results on the issue of cointegration and ignored tests for parameter instability of the cointegrated systems, this study has presented new evidence on an empirically stable petroleum oil demand function. Copyright International Atlantic Economic Society 2000

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 28 (2000)
    Issue (Month): 4 (December)
    Pages: 463-477

    in new window

    Handle: RePEc:kap:atlecj:v:28:y:2000:i:4:p:463-477
    Contact details of provider: Postal: Suite 650, International Tower, 229 Peachtree Street, N.E., Atlanta, GA 30303
    Phone: (404) 965-1555
    Fax: (404) 965-1556
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Wojciech W. Charemza & Derek F. Deadman, 1992. "New Directions In Econometric Practice," Books, Edward Elgar, number 84, March.
    2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    3. Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-43, January.
    4. Henrik Hansen & Søren Johansen, 1992. "Recursive Estimation in Cointegrated VAR-Models," Discussion Papers 92-13, University of Copenhagen. Department of Economics.
    5. Pagan, Adrian & Ullah, Aman, 1988. "The Econometric Analysis of Models with Risk Terms," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(2), pages 87-105, April.
    6. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 383-97, August.
    7. Peter Ferderer, J., 1996. "Oil price volatility and the macroeconomy," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 1-26.
    8. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
    9. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
    10. Solo, Victor, 1995. "Errors in Variables and Cointegration," Econometric Theory, Cambridge University Press, vol. 11(01), pages 60-80, February.
    11. Hendry, David F & Doornik, Jurgen A, 1994. "Modelling Linear Dynamic Econometric Systems," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(1), pages 1-33, February.
    12. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
    13. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:28:y:2000:i:4:p:463-477. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

    or (Christopher F. Baum)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.