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Oil shocks through international transport costs: evidence from U.S. business cycles

  • Hakan Yilmazkuday

The effects of oil shocks on output volatility through international transport costs are investigated in an open-economy DSGE model. Two versions of the model, with and without international transport costs, are structurally estimated for the U.S. economy by a Bayesian approach for moving windows of ten years. For model selection, the posterior odds ratios of the two versions are compared for each ten-year window. The version with international transport costs is selected during periods of high volatility in crude oil prices. The contribution of international transport costs to the volatility of U.S. GDP has been estimated as high as 36 percent during periods of oil crises.

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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 82.

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Date of creation: 2011
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Handle: RePEc:fip:feddgw:82
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