Nonlinearities in the oil price-output relationship
It is customary to suggest that the asymmetry in the transmission of oil price shocks to real output is well established. Much of the empirical work cited as being in support of asymmetries, however, has not directly tested the hypothesis of an asymmetric transmission of oil price innovations. Moreover, many of the papers quantifying these asymmetric responses are based on censored oil price VAR models which recently have been shown to be invalid. Other studies are based on dynamic correlations in the data that do not shed light on the central question of whether the structural responses of real output triggered by positive and negative oil price innovations are asymmetric. Recently, a number of new methodologies have been introduced and applied to the problem of testing and quantifying asymmetric responses of U.S. real economic activity to positive and negative oil price innovations. Our objective is to put this literature in perspective, to contrast it with more traditional approaches, to highlight directions for further research, and to reconcile some seemingly conflicting results reported in the literature.
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- Lutz Kilian & Clara Vega, 2008.
"Do energy prices respond to U.S. macroeconomic news? a test of the hypothesis of predetermined energy prices,"
International Finance Discussion Papers
957, Board of Governors of the Federal Reserve System (U.S.).
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- Ryan Kellogg, 2010.
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NBER Working Papers
16541, National Bureau of Economic Research, Inc.
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E2008/15, Cardiff University, Cardiff Business School, Economics Section, revised Nov 2009.
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- Lutz Kilian & Yun Jung Kim, 2011. "How Reliable Are Local Projection Estimators of Impulse Responses?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1460-1466, November.
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"Oil Price Uncertainty,"
World Scientific Books,
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- Edelstein, Paul & Kilian, Lutz, 2009. "How sensitive are consumer expenditures to retail energy prices?," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 766-779, September.
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- Lutz Kilian & Logan T. Lewis, 2011.
"Does the Fed Respond to Oil Price Shocks?,"
Royal Economic Society, vol. 121(555), pages 1047-1072, 09.
- Anton Nakov & Andrea Pescatori, 2010. "Monetary Policy Trade-Offs with a Dominant Oil Producer," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(1), pages 1-32, 02.
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- James D. Hamilton, 2000.
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NBER Working Papers
7755, National Bureau of Economic Research, Inc.
- Lutz Kilian, 2010. "Explaining Fluctuations in Gasoline Prices: A Joint Model of the Global Crude Oil Market and the U.S. Retail Gasoline Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 87-112.
- Inoue, Atsushi & Kilian, Lutz, 2002.
"In-Sample or Out-of-Sample Tests of Predictability: Which One Should We Use?,"
CEPR Discussion Papers
3671, C.E.P.R. Discussion Papers.
- Atsushi Inoue & Lutz Kilian, 2005. "In-Sample or Out-of-Sample Tests of Predictability: Which One Should We Use?," Econometric Reviews, Taylor & Francis Journals, vol. 23(4), pages 371-402.
- Inoue, Atsushi & Kilian, Lutz, 2002. "In-sample or out-of-sample tests of predictability: which one should we use?," Working Paper Series 0195, European Central Bank.
- Herrera, Ana María & Lagalo, Latika Gupta & Wada, Tatsuma, 2011. "Oil Price Shocks And Industrial Production: Is The Relationship Linear?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 472-497, November.
- Kilian, Lutz, 2007.
"The Economic Effects of Energy Price Shocks,"
CEPR Discussion Papers
6559, C.E.P.R. Discussion Papers.
- Herrera, Ana María & Pesavento, Elena, 2009. "Oil Price Shocks, Systematic Monetary Policy, And The “Great Moderation”," Macroeconomic Dynamics, Cambridge University Press, vol. 13(01), pages 107-137, February.
- Lutz Kilian & Robert J. Vigfusson, 2011. "Are the responses of the U.S. economy asymmetric in energy price increases and decreases?," Quantitative Economics, Econometric Society, vol. 2(3), pages 419-453, November.
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