Oil price uncertainty, monetary policy and the macroeconomy: The Canadian perspective

Omar Bashar (), Ikm Mokhtarul Wadud and Huson Ali Ahmed ()

Economic Modelling, 2013, vol. 35, issue C, 249-259

Abstract: This paper revisits the link between oil price uncertainty and macroeconomy in the context of a net oil exporting country, Canada. Results obtained from alternative Structural VAR models suggest that while shocks to oil price level do not affect the aggregate level of output, the oil price uncertainty exerts considerable impacts on the Canadian economy. It is found that oil price uncertainty makes a major contribution to overall variations in the output level. Results also show that higher oil price uncertainty significantly decreases both output and price levels, resembling an adverse demand shock. Oil price uncertainty causes output to decline in most of the sub-sectors including durable and non-durable manufacturing. It is found that the Central Bank of Canada reacts with an expansionary monetary policy to oil price uncertainty shocks.

Keywords: Oil price uncertainty; Structural VAR; Monetary Policy; Canada (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 Q43 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:249-259

DOI: 10.1016/j.econmod.2013.07.007

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