A New Approach for Identifying Demand and Supply Shocks in the Oil Market

Jan Groen, Kevin McNeil and Menno Middeldorp ()

No 20130325, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: An oil-price spike is often used as the textbook example of a supply shock. However, rapidly rising oil prices can also reflect a demand shock. Recognizing the difference is important for central bankers. A supply-driven increase in the price of oil can result in higher unemployment and inflation, leaving central bankers with the difficult decision to loosen policy, tighten policy, or not respond at all. A demand-driven increase reflecting global growth may support the case for tighter policy. In this post, we describe an approach for decomposing oil price changes into supply and demand shocks using financial market data.

Keywords: Oil prices; dynamic factors; demand and supply (search for similar items in EconPapers)
Date: 2013-03-25
New Economics Papers: this item is included in nep-ene
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2013 ... -the-oil-market.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:86862

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().