Oil price shocks and monetary policy in a data-rich environment

Knut Are Aastveit

No 2013/10, Working Paper from Norges Bank

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 matter. 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)
Pages: 48 pages
Date: 2013-04-03
New Economics Papers: this item is included in nep-ene, nep-mac and nep-mon
References: View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2013_10

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