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Oil price shocks in real time

Author

Listed:
  • Andrea Gazzani

    (Bank of Italy)

  • Fabrizio Venditti

    (Bank of Italy)

  • Giovanni Veronese

    (Bank of Italy)

Abstract

Oil prices contain information on global shocks of key relevance for monetary policy decisions. We propose a novel approach to identify these shocks at the daily frequency in a Structural Vector Autoregression (SVAR). Our method is devised to be used in real time to interpret developments in the oil market and their implications for the macroeconomy, circumventing the problem of publication lags that plagues monthly data used in workhorse SVAR models. This method proves particularly valuable for monetary policymakers at times when macroeconomic conditions evolve rapidly, like during the COVID-19 pandemic or the invasion of Ukraine by Russia.

Suggested Citation

  • Andrea Gazzani & Fabrizio Venditti & Giovanni Veronese, 2024. "Oil price shocks in real time," Temi di discussione (Economic working papers) 1448, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1448_24
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    References listed on IDEAS

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    2. Lukas Hack & Davud Rostam-Afschar, 2024. "Understanding Firm Dynamics with Daily Data," CRC TR 224 Discussion Paper Series crctr224_2024_593, University of Bonn and University of Mannheim, Germany.

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    More about this item

    Keywords

    oil prices; VAR; real time; monetary policy;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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