Dynamic Responses to Oil Price Shocks: Conditional vs Unconditional (A)symmetry

Emir Malikov

MPRA Paper from University Library of Munich, Germany

Abstract: The impulse-response-function-based Wald test has been gaining wide popularity among researchers seeking to formally test for (a)symmetries in dynamic responses of various macroeconomic aggregates to oil price shocks. However, because the IRF-based Wald test is conditional on the magnitude of an oil price shock, it can sometimes prove to be impractical, especially when producing contrasting evidence for shocks of different sizes. To circumvent this problem, this paper suggests considering a nonparametric IRF-density-based test in addition to the Wald. The former allows the analysis of (a)symmetries in dynamic impulse responses to positive and negative oil price shocks of a wide range of magnitudes. The test permits inference about a general tendency of (a)symmetries in impulse responses as opposed to (a)symmetries pertinent to a shock of a given size only. The examined (a)symmetry is thus unconditional of the magnitude of a shock. Importantly, the testing procedure allows accounting for the relative likelihood of observing the disturbance of a given size.

Keywords: Asymmetry; Impulse Response; Job Creation and Destruction; Macroeconomy; Nonlinearity; Oil Price; SVAR (search for similar items in EconPapers)
JEL-codes: Q43 (search for similar items in EconPapers)
Date: 2015-09-30
New Economics Papers: this item is included in nep-ene
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Related works:
Journal Article: Dynamic responses to oil price shocks: Conditional vs unconditional (a)symmetry (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:68453

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