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Oil price shocks in a data-rich environment

Knut Are Aastveit ()

Energy Economics, 2014, vol. 45, issue C, 268-279

Abstract: This paper examines the impact of different types of oil price shocks on the U.S. economy, using a factor-augmented VAR (FAVAR) approach. The results indicate that when examining the effects of oil price shocks, it is important to account for the interaction between the oil market and the macroeconomy. I find that oil demand shocks are more important than oil supply shocks in driving several macroeconomic variables, and that the origin of demand shocks matters. Specifically, the U.S. economy and monetary policy respond differently to global demand shocks that have the effect of raising the price of oil and to oil-specific demand shocks.

Keywords: Oil demand shocks; Oil supply shocks; Business cycle; Monetary policy; Factor model; FAVAR (search for similar items in EconPapers)
JEL-codes: C3 E31 E32 E4 E5 Q43 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:45:y:2014:i:c:p:268-279

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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