The time-varying responses of financial intermediation and inflation to oil supply and demand shocks in the US: Evidence from Bayesian TVP-SVAR-SV approach

Talel Boufateh and Zied Saadaoui

Energy Economics, 2021, vol. 102, issue C

Abstract: The perception of the pass-through of oil price shocks on the real and financial spheres has undergone considerable evolution with the emergence of a literature devoted to the sources of oil price fluctuations. This perception is also found to evolve over time depending on market expectations, structural changes or crises. Focusing on the specific case of the US, this paper investigates the time-varying effects of oil price shocks on financial intermediation (credit market) and inflation as a transmission channel. Monthly data are used for a period that encompasses the recent Covid-19 pandemic crisis. Prior to the construction of a time-varying parameter structural vector autoregression stochastic volatility (TVP-SVAR-SV), a structural VAR (SVAR) model is estimated to disentangle oil price shocks in four shocks: oil supply, aggregate demand, domestic demand and oil-specific demand shocks. The results underscore the increasing response of financial intermediation to oil supply, aggregate demand and oil specific demand shocks since the shale revolution. In addition, the response of credit markets to aggregate demand shocks during the covid-19 pandemic is different from that observed during the subprime crisis. It appears also that the response of inflation influence the reaction of the credit market to aggregate and domestic demand shocks.

Keywords: Oil price shocks; Supply; Demand; Inflation; Financial intermediation; TVP-SVAR-SV (search for similar items in EconPapers)
JEL-codes: C32 E31 E37 E51 Q41 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:102:y:2021:i:c:s0140988321004126

DOI: 10.1016/j.eneco.2021.105535

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