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Natural Gas and U.S. Economic Activity

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  • Arora, Vipin
  • Lieskovsky, Jozef

Abstract

Previous empirical work has shown that real natural gas prices have a small to negligible impact on total U.S. industrial production and most of its sub-indices. We first show that these results still hold with a sample that runs through mid-2012 and uses a different natural gas price. Concerns about the joint determination of the real natural gas price and U.S. economic activity lead us to reassess these results using a multivariate framework. Our model shows that natural gas does affect U.S. economic activity, but primarily through changes in natural gas production. We also show that natural gas supply, inventory demand, and responses to events in the oil market have been the most important contributors to the real natural gas price since 2000. In terms of approximate point estimates, our results indicate that increases in natural gas supply can raise total U.S. industrial production by 0.1 to 0.5 percent under plausible scenarios.

Suggested Citation

  • Arora, Vipin & Lieskovsky, Jozef, 2012. "Natural Gas and U.S. Economic Activity," MPRA Paper 42659, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42659
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    References listed on IDEAS

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    4. David J. Ramberg and John E. Parsons, 2012. "The Weak Tie Between Natural Gas and Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    5. Arora Vipin, 2014. "Aggregate impacts of recent US natural gas trends," The B.E. Journal of Macroeconomics, De Gruyter, vol. 14(1), pages 1-25, January.
    6. Kevin L. Kliesen, 2006. "Rising natural gas prices and real economic activity," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 511-526.
    7. Eklund, Jana & Kapetanios, George & Price, Simon, 2010. "Forecasting in the presence of recent structural change," Bank of England working papers 406, Bank of England.
    8. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
    9. Sari, Ramazan & Ewing, Bradley T. & Soytas, Ugur, 2008. "The relationship between disaggregate energy consumption and industrial production in the United States: An ARDL approach," Energy Economics, Elsevier, vol. 30(5), pages 2302-2313, September.
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    11. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
    12. Apergis, Nicholas & Payne, James E., 2010. "Natural gas consumption and economic growth: A panel investigation of 67 countries," Applied Energy, Elsevier, vol. 87(8), pages 2759-2763, August.
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    Cited by:

    1. Geng, Jiang-Bo & Ji, Qiang & Fan, Ying, 2016. "The behaviour mechanism analysis of regional natural gas prices: A multi-scale perspective," Energy, Elsevier, vol. 101(C), pages 266-277.
    2. Arora Vipin, 2014. "Aggregate impacts of recent US natural gas trends," The B.E. Journal of Macroeconomics, De Gruyter, vol. 14(1), pages 1-25, January.
    3. Ji, Qiang & Geng, Jiang-Bo & Fan, Ying, 2014. "Separated influence of crude oil prices on regional natural gas import prices," Energy Policy, Elsevier, vol. 70(C), pages 96-105.
    4. repec:eee:eneeco:v:65:y:2017:i:c:p:411-423 is not listed on IDEAS

    More about this item

    Keywords

    Natural gas; VAR; Granger causality; endogenous; industrial production;

    JEL classification:

    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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