Through a Glass Darkly - Deciphering the Impact of Oil Price Shocks

Ashima Goyal and Arjun Singh

Macroeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: In order to examine if the impact of oil price shocks depends on the structure of an economy, a vertical (VSC) and a horizontal (HSC) long-run supply curve identification are successively imposed on a three variable VAR with Indian time series data. While core inflation is measured with the VSC, the HSC requires a new concept of demand-driven inflation : Residual (demand) inflation, which gives the impact of short and medium run demand shocks on inflation. Core and residual inflation are both estimated. The data favors the HSC, but both identifications imply that policy demand squeeze aggravated international oil price shocks.

Keywords: Oil shocks; VAR; Identification strategies; Developing economy; Residual Inflation (search for similar items in EconPapers)
JEL-codes: C32 E31 (search for similar items in EconPapers)
Date: 2006-01
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Through a Glass Darkly: Deciphering the Impact of Oil Price Shocks (2009)
Working Paper: Through a glass darkly: Deciphering the impact of oil price shocks (2006)
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