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Macroeconomic effects of precautionary demand for oil

Alessio Anzuini, Patrizio Pagano () and Massimiliano Pisani

No 918, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We evaluate the macroeconomic effects of shocks specific to the oil market, which mainly reflect fluctuations in precautionary demand for oil driven by uncertainty about future supplies. A two-stage identification procedure is used. First, daily changes in the futures-spot spread proxy for precautionary demand shocks and the path of oil prices is estimated. This information is then exploited to restrict the oil price response in a VAR. Impulse responses suggest that such shocks reduce output and raise prices. Historical decomposition shows that they contributed significantly to the U.S. recessions in the 1990s and in the early 2000s, but not to the most recent slump.

Keywords: vector autoregression; oil shock; futures; news (search for similar items in EconPapers)
JEL-codes: C2 E3 O41 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-ene and nep-mac
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Citations: View citations in EconPapers (3)

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Journal Article: Macroeconomic Effects of Precautionary Demand for Oil (2015) Downloads
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