The time varying effect of oil price shocks on euro-area exports

Marianna Riggi () and Fabrizio Venditti

No 1035, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper we provide novel evidence on changes in the relationship between the real price of oil and real exports in the euro area. By combining robust predictions on the sign of the impulse responses obtained from a theoretical model with restrictions on the slope of the oil demand and oil supply curves, we identify oil supply and foreign productivity shocks in a time varying VAR with stochastic volatility. We find that from the 1980s onwards the relationship between oil prices and euro area exports has become less negative conditional on oil supply shortfalls and more positive conditional on foreign productivity shocks. Using the theoretical model we show that our empirical findings can be accounted for by (i) stronger trade relationship between the euro area and emerging economies (ii) a decrease in the share of oil in production and (iii) increased competitive pressures in the product market.

Keywords: oil prices; VAR; time-varying parameters; exports (search for similar items in EconPapers)
JEL-codes: C32 E3 F14 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-eec, nep-ene, nep-int and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Journal Article: The time varying effect of oil price shocks on euro-area exports (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1035_15

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