Monetary Policy Responses to Oil Price Fluctuations

Bodenstein, Martin; Guerrieri, Luca; Kilian, Lutz

doi:10.1057/imfer.2012.19

Cited by 170 publications

(99 citation statements)

References 47 publications

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“…3 See, for instance, Bernanke et al (1997); Barsky and Kilian (2001); Bodenstein et al (2008); Nakov and Pescatori (2010); Kormilitsina (2011);Bodenstein et al (2012);and Natal (2012). 4 The importance of time-variation in the variance of key macroeconomic aggregates has most clearly emerged from the analysis of competing explanations for the steep decline in inflation and output volatility since the mid1980s (often referred to as the Great Moderation); see, for instance, Primiceri (2005); Sims and Zha (2006).…”

Section: Introductionmentioning

confidence: 99%

“…Initial contributions to this literature, focusing on the US context, point to a pronounced systematic monetary policy response to oil price shocks that counteracts their impact on inflation (see Bernanke et al (1997)). Subsequent analysis instead has favoured a more nuanced reaction function that is conditional on the source of the shock; in particular, both VAR-and DSGE-based analyses, indicate that US monetary policy typically counteracts oil price shocks if they originate from global demand pressures, while adopting the opposite response to oil price shocks driven by supply disruptions (see, e.g., Kilian and Lewis (2011) and Bodenstein et al (2012)). Our paper provides further evidence of such nuanced response, in that euro area monetary policy has tended to counteract oil price shocks only when they risk inducing second-round effects.…”

Section: Introductionmentioning

confidence: 99%

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Macroeconomic Implications of Oil Price Fluctuations: A Regime-Switching Framework for the Euro Area

Holm‐Hadulla

Hubrich

2017

FEDS

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We investigate whether the response of the macro-economy to oil price shocks undergoes episodic changes. Employing a regime-switching vector autoregressive model we identify two regimes that are characterized by qualitatively different patterns in economic activity and inflation following oil price shocks in the euro area. In the normal regime, oil price shocks trigger only limited and short-lived adjustments in these variables. In the adverse regime, by contrast, oil price shocks are followed by sizeable and sustained macroeconomic fluctuations, with inflation and economic activity moving in the same direction as the oil price. The responses of inflation expectations and wage growth point to second-round effects as a potential driver of the dynamics characterising the adverse regime. The systematic response of monetary policy works against such second-round effects in the adverse regime but is insufficient to fully offset them. The model also delivers (conditional) probabilities for being (staying) in either regime, which may help interpret oil price fluctuations -and inform deliberations on the adequate policy response -in real-time.JEL Classification: E31, E52, C32

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Macroeconomic Implications of Oil Price Fluctuations: A Regime-Switching Framework for the Euro Area

Holm‐Hadulla

Hubrich

2017

FEDS

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“…9 An important observation to note in both graphs of Figure 3 is that 11 states' personal income (Delaware, Iowa, Kansas, Louisiana, Montana, Nevada, North Dakota, Oklahoma, South Dakota, West Virginia, and Wyoming) respond positively to a positive oil price shock. Interestingly, while Oklahoma and Wyoming, and to a lesser degree North Dakota, have an above average percentage of their gross state products devoted to oil and gas production, we are unable to identify other relevant common traits amongst these states to 9 The data used in the figures span an entire column or row in Table 4. The OLS fitted lines shown in Figures 3 through 6 are based on unconditional estimates as there are no other regional variables employed in the estimation.…”

Section: Robustness Testsmentioning

confidence: 98%

“…We include crude oil prices as an endogenous variable consistent with the arguments put forth by Bodenstein, Guerrieri, and Kilian (2012). Each equation for a particular state has identical regressors, and therefore, is estimated by OLS without loss of efficiency, see Judge, Hill, Griffiths, Lutkepohl, and Lee (1988).…”

Section: The Base Model and Datamentioning

confidence: 99%

Oil Price Shocks: Bank Size and Firm Size Effects

Smoluk¹

2018

JFE

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This paper uses regional variation to study the propagation of oil price shocks from vector autoregressions. Using data from the lower 48 states, we find strong and distinct asymmetrical patterns in the impulse responses of personal income and housing prices from an oil price shock. Specifically, impulse responses are amplified or dampened depending on the size distributions of banks and firms within a state. More importantly, the small bank and small firm size effects normally associated with the propagation of monetary policy shocks, are shown to propagate oil price shocks. Overall, our results are indicative of multiple transmission channels.JEL Classifications: R11, Q43, E52, G21

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“…A decline in oil prices may introduce additional deflationary pressures, producing a hike in real interest rates that may hurt economic growth. 13 Therefore, central banks in oil-importing countries should be ready to act in the event that further declines in oil prices that may threaten the economic recovery.…”

Section: Policy Implicationsmentioning

confidence: 99%

Quantitative effects of the shale oil revolution

2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThe aim of this paper is to analyze the impact of the so-called "shale oil revolution" on oil prices and economic growth. We employ a general equilibrium model of the world oil market in which Saudi Arabia is the dominant firm, with the rest of the producers as a competitive fringe. Our results suggest that most of the expected increase in US oil supply due to the shale oil revolution has already been incorporated into oil prices and that it will produce an additional increase of 0.2 percent in the GDP of oil importers in the period 2010-2018. We also employ the model to analyse the collapse in oil prices in the second half of 2014 and conclude that it was mainly due to positive unanticipated supply shocks.

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Monetary Policy Responses to Oil Price Fluctuations

Cited by 170 publications

References 47 publications

Macroeconomic Implications of Oil Price Fluctuations: A Regime-Switching Framework for the Euro Area

Macroeconomic Implications of Oil Price Fluctuations: A Regime-Switching Framework for the Euro Area

Oil Price Shocks: Bank Size and Firm Size Effects

Quantitative effects of the shale oil revolution

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