IDEAS home Printed from
   My bibliography  Save this paper

The Impact of Large Structural Shocks on Economic Relationships: Evidence from Oil Price Shocks


  • George Kapetanios

    () (Queen Mary, University of London)

  • Elias Tzavalis

    (Queen Mary, University of London)


This paper introduces a new model of structural breaks which assumes that structural breaks are driven by large economic shocks. The model specifies that both the timing and size of breaks are stochastic and it can be used to investigate the impact of large economic shocks on the stability of economic relationships. An application of the model to the oil-macroeconomy relationship has shown that the apparent instability of this relationship since the oil crisis in year 1973 can be attributed to large oil price shocks.

Suggested Citation

  • George Kapetanios & Elias Tzavalis, 2004. "The Impact of Large Structural Shocks on Economic Relationships: Evidence from Oil Price Shocks," Working Papers 524, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp524

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Kapetanios, George, 2000. "Small sample properties of the conditional least squares estimator in SETAR models," Economics Letters, Elsevier, vol. 69(3), pages 267-276, December.
    2. Balke, Nathan S & Fomby, Thomas B, 1994. "Large Shocks, Small Shocks, and Economic Fluctuations: Outliers in Macroeconomic Time Series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(2), pages 181-200, April-Jun.
    3. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
    4. A Carruth & M Hooker & A Oswald, 1994. "Unemployment, Oil Prices and the Real Interest Rate: Evidence from Canada and the UK," CEP Discussion Papers dp0188, Centre for Economic Performance, LSE.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Richard Harrison & George Kapetanios & Alasdair Scott & Jana Eklund, 2008. "Breaks in DSGE models," 2008 Meeting Papers 657, Society for Economic Dynamics.
    2. Kihaule, Arnold Mathias, 2012. "The impact of economic policy shocks on the outcomes of the fiscal adjustment policies in Tanzania," MPRA Paper 46151, University Library of Munich, Germany, revised Feb 2013.
    3. Kapetanios, George, 2008. "Bootstrap-based tests for deterministic time-varying coefficients in regression models," Computational Statistics & Data Analysis, Elsevier, vol. 53(2), pages 534-545, December.

    More about this item


    Structural breaks; State space model; Oil shocks;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qmw:qmwecw:wp524. 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: (Nicholas Owen). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.