Through a Glass Darkly: Deciphering the Impact of Oil Price Shocks

Ashima Goyal

Working Papers from eSocialSciences

Abstract: In order to examine if the impact of oil price shocks depends on the structure of an economy, a vertical (VSC) and a horizontal (HSC) long-run supply curve identification are successively imposed on a three variable VAR with Indian time series data. While core inflation is measured with the VSC, the HSC requires a new concept of demand-driven inflation: Residual (demand) inflation, which gives the impact of short and medium run demand shocks on inflation. Core and residual inflation are both estimated. The data favors the HSC, but both identifications imply that policy demand squeeze aggravated international oil price shocks.

Keywords: VAR; identification strategies; developing economy; residual; output; labor surplus; oil price; economy; vertical; horizontal; VSC; HSC; supply curve; inflation; time series; data; demand; residual; India; Indian (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-cwa, nep-ene and nep-mac
Note: Institutional Papers
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Related works:
Working Paper: Through a Glass Darkly - Deciphering the Impact of Oil Price Shocks (2006)
Working Paper: Through a glass darkly: Deciphering the impact of oil price shocks (2006)
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