Refining the Workhorse Oil Market Model

Xiaoqing Zhou

No 1910, Working Papers from Federal Reserve Bank of Dallas

Abstract: The Kilian and Murphy (2014) structural vector autoregressive model has become the workhorse model for the analysis of oil markets. I explore various refinements and extensions of this model, including the effects of (1) correcting an error in the measure of global real economic activity, (2) explicitly incorporating narrative sign restrictions into the estimation, (3) relaxing the upper bound on the impact price elasticity of oil supply, (4) evaluating the implied posterior distribution of the structural models, and (5) extending the sample. I demonstrate that the substantive conclusions of Kilian and Murphy (2014) are largely unaffected by these changes.

Keywords: Oil market; global real activity; structural VAR; narrative sign restrictions; identification; Bayesian inference (search for similar items in EconPapers)
JEL-codes: C32 C52 Q41 Q43 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2019-09-06
New Economics Papers: this item is included in nep-ene and nep-ore
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Citations: View citations in EconPapers (28)

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Journal Article: Refining the workhorse oil market model (2020)
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DOI: 10.24149/wp1910

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