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The U.S. Energy Information Administration estimates that approximately 52% of total U.S. crude oil was produced from shale oil resources in 2015. We examine whether the recent low crude oil price is attributable to this shale revolution in the U.S., using a SVAR model with structural breaks. Our results reveal that U.S. JEL classification: C32, E32, F43.

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Many studies have pointed out that the underlying relations and functions for the monetary model (e.g. the PPP relation, the money demand function, monetary policy rule, etc.) have undergone parameter instabilities and that the relation between exchange rates and macro fundamentals are unstable due to the shift in the economic models in foreign exchange traders' views or the scapegoat effect in Bacchetta and van . Facing this, we consider a monetary model with time-varying cointegration coefficients in order to understand exchange rate movements. We provide statistical evidence against the standard monetary model with constant cointegration coefficients but find favorable evidence for the time-varying cointegration relationship between exchange rates and monetary fundamentals. Furthermore, we demonstrate that deviations between the exchange rate and fundamentals from the time-varying cointegration relation have strong predictive power for future changes in exchange rates through in-sample analysis, out-of-sample analysis, and directional accuracy tests.