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What is an Oil Shock
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This paper used a flexible approach to characterize the nonlinear relation between oil price changes and GDP growth and reported clear evidence of nonlinearity, consistent with earlier claims in the literature that oil price increases are much more important than oil price decreases, and increases have significantly less predictive content if they simply correct earlier decreases.Abstract:
This paper uses a flexible approach to characterize the nonlinear relation between oil price changes and GDP growth The paper reports clear evidence of nonlinearity, consistent with earlier claims in the literature-- oil price increases are much more important than oil price decreases, and increases have significantly less predictive content if they simply correct earlier decreases An alternative interpretation is suggested based on estimation of a linear functional form using exogenous disruptions in petroleum supplies as instruments The evidence suggests that oil shocks matter because they disrupt spending by consumers and firms on certain key sectorsread more
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Not All Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market
Lutz Kilian,Lutz Kilian +1 more
TL;DR: In this paper, a structural decomposition of the real price of crude oil in four components is proposed: oil supply shocks driven by political events in OPEC countries; other oil supply shock; aggregate shocks to the demand for industrial commodities; and demand shocks that are specific to the crude oil market.
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The impact of oil price shocks on the u.s. stock market
Lutz Kilian,Cheolbeom Park +1 more
TL;DR: In this paper, the reaction of U.S. real stock returns to an oil price shock differs greatly depending on whether the change in the price of oil is driven by demand or supply shocks in the oil market.
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Causes and Consequences of the Oil Shock of 2007–08
TL;DR: This article explored similarities and differences between the run-up of oil prices in 2007-08 and earlier oil price shocks, looking at what caused these price increases and what effects they had on the economy.
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Oil price shocks and stock markets in the U.S. and 13 European countries
Jung Wook Park,Ronald A. Ratti +1 more
TL;DR: This paper found that an increase in real oil price is associated with a significant increase in the short-term interest rate in the U.S. and eight out of 13 European countries within one or two months.
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Understanding Crude Oil Prices
TL;DR: The authors examines the factors responsible for changes in crude oil prices and concludes that although scarcity rent made a negligible contribution to the price of oil in 1997, it could now begin to play a role.
References
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Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation
TL;DR: In this article, a new class of stochastic processes called autoregressive conditional heteroscedastic (ARCH) processes are introduced, which are mean zero, serially uncorrelated processes with nonconstant variances conditional on the past, but constant unconditional variances.
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Tests for Parameter Instability and Structural Change with Unknown Change Point.
TL;DR: In this article, the authors considered tests for parameter instability and structural change with unknown change point, and the results apply to a wide class of parametric models that are suitable for estimation by generalized method of moments procedures.
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Oil and the Macroeconomy since World War II
TL;DR: The authors found that all but one of the U.S. recessions since World War II have been preceded, typically with a lag of around three-fourths of a year, by a dramatic increase in the price of crude petroleum.
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Optimal Tests When a Nuisance Parameter is Present Only under the Alternative
TL;DR: In this paper, the authors derived asymptotically optimal tests for testing problems in which a nuisance parameter exists under the alternative hypothesis but not under the null, using a weighted average power criterion.
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This is what happened to the oil price-macroeconomy relationship
TL;DR: Many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter as mentioned in this paper, and when one looks at the net increase in oil prices over the year, recent data are consistent with the historical correlation between oil shocks and recessions.