The Dynamic Impact of Structural Oil Price Shocks on the Macroeconomy

Li Ping (), Li Jie () and Zhang Ziyi ()
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Li Ping: School of Economics and Management, Beihang University, Beijing100191, China
Li Jie: School of International Economics and Management, Beijing Technology and Business University, Beijing100048, China
Zhang Ziyi: School of Economics and Management, Beihang University, Beijing100191, China

Journal of Systems Science and Information, 2021, vol. 9, issue 5, 469-497

Abstract: In this paper, we apply the structural vector autoregression (SVAR) model to decompose the international oil price shock into oil supply shocks, aggregate demand shocks and oil-specific demand shocks, and then use the DCC-GARCH model to analyse the dynamic correlations between these three kinds of oil price shocks and the macroeconomic variables of several oil importing and exporting countries. To quantify the intensity of the effect of oil shocks on these variables, we propose a measure, conditional expectation (CoE), to capture the percent change of the economic variable under oil price shocks relative to the median state. The time-varying copula model is employed to estimate the proposed measure through time. The empirical results show that, for instance, the impacts of oil price shocks on macroeconomic variables are different in different periods, showing the time-varying characteristics. Additionally, the impacts of oil price shocks on macroeconomic variables show great differences and some similarities among different countries. Finally, we give some policy suggestions for these countries, in particular for China’s special results.

Keywords: structured oil shocks; SVAR; DCC-GARCH; macro-economy; conditional expectation (CoE); time-varying copula (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:9:y:2021:i:5:p:469-497:n:2

DOI: 10.21078/JSSI-2021-469-29

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