Decoding Structural Shocks in the Global Oil Market

Irma Alonso-Álvarez and Daniel Santabárbara
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Irma Alonso-Álvarez: BANCO DE ESPAÑA
Daniel Santabárbara: BANCO DE ESPAÑA

No 2513, Occasional Papers from Banco de España

Abstract: In this paper, we present a straightforward structural model of the oil market designed to disentangle demand and supply shocks. This model is regularly employed and updated in the Banco de España to enhance the understanding of oil market dynamics. Building on the work of Kilian and Murphy (2014), we introduce a novel business cycle measure based on the co-movement of real commodity prices to capture global demand shocks, and also include an oil-specific demand shock. Our impulse response functions and historical decomposition align with previous studies and effectively capture significant historical milestones.

Keywords: oil structural model; supply; demand; global real activity; oil-specific demand; VAR; sign restrictions. (search for similar items in EconPapers)
JEL-codes: Q41 Q43 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2025-06
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Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2513e

DOI: 10.53479/40225

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