IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market

  • Kilian, Lutz

Using a newly developed measure of global real economic activity, a structural decomposition of the real price of crude oil in four components is proposed: oil supply shocks driven by political events in OPEC countries; other oil supply shocks; aggregate shocks to the demand for industrial commodities; and demand shocks that are specific to the crude oil market. The latter shock is designed to capture shifts in the price of oil driven by higher precautionary demand associated with concerns about the availability of future oil supplies. The paper quantifies the magnitude and timing of these shocks, their dynamic effects on the real price of oil and their relative importance in determining the real price of oil during 1975-2005. The analysis also sheds light on the origins of the major oil price shocks since 1979. Distinguishing between the sources of higher oil prices is shown to be crucial for assessing the effect of higher oil prices on U.S. real GDP and CPI inflation. It is shown that policies aimed at dealing with higher oil prices must take careful account of the origins of higher oil prices. The paper also quantifies the extent to which the macroeconomic performance of the U.S. since the mid-1970s has been determined by the external economic shocks driving the real price of oil as opposed to domestic economic factors and policies.

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: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5994
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

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.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5994.

as
in new window

Length:
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:cpr:ceprdp:5994
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


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. Gonçalves, Sílvia & Kilian, Lutz, 2002. "Bootstrapping autoregressions with conditional heteroskedasticity of unknown form," Working Paper Series 0196, European Central Bank.
  2. Wouter J. Den Haan & Steven Sumner, 2001. "The Comovements between Real Activity and Prices in the G7," NBER Working Papers 8195, National Bureau of Economic Research, Inc.
  3. Lutz Kilian, 2008. "Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 216-240, May.
  4. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
  5. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
  6. den Haan, Wouter J., 2000. "The comovement between output and prices," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 3-30, August.
Full references (including those not matched with items on IDEAS)

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5994. 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: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address

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.