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Author: Mark Alan Melichar
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Languages : en
Pages :
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In the first chapter I study the effects of oil price shocks on economic activity at the U.S. state-level, an innovative feature of this dissertation. States which rely more heavily on manufacturing or tourism are more adversely affected by adverse oil price shocks, while states which are major energy producers either benefit or experience insignificant economic changes from historically large oil price increases. Additionally, oil price increases from 1986 to 2011 have not impacted state-level economies to the same degree as increases from 1976 to 1985. This discrepancy can be attributed to a fundamental change in the structure of the U.S. economy, for example, a declining manufacturing sector or an increase in the efficiency with which energy is used in the production process. In the second chapter I explore the effects of alternative measures of energy price shocks on economic activity and examine the relative performance of these alternative measures in forecasting macroeconomic activity. The alternative energy prices I consider are: gasoline, diesel, natural gas, heating oil and electricity. I find that alternative measures of energy price shocks produce different patterns of impulse responses than oil price shocks. The overwhelming evidence indicates that alternative energy price models, excluding a model containing gasoline prices, outperforms the baseline model containing oil prices for many states, particularly at short-to-mid forecast horizons. In the third chapter, which is coauthored with Lance Bachmeier, we determine whether accounting for oil price endogeneity is important when predicting state-level economic activity. We find that accounting for endogeneity matters for in-sample fit for most states. Specifically, in-sample fit would be improved by using a larger model which contains both regular oil price and endogenous oil price movements. However, we conclude that accounting for endogeneity is not important for out-of-sample forecast accuracy, and a simple model containing only the change in the price of oil produces equally accurate forecasts. Accounting for endogeneity is particularly important in an environment in which rising oil prices were caused by a growing global economy, such as in the years 2004-2007.
Author: Mark Alan Melichar
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
In the first chapter I study the effects of oil price shocks on economic activity at the U.S. state-level, an innovative feature of this dissertation. States which rely more heavily on manufacturing or tourism are more adversely affected by adverse oil price shocks, while states which are major energy producers either benefit or experience insignificant economic changes from historically large oil price increases. Additionally, oil price increases from 1986 to 2011 have not impacted state-level economies to the same degree as increases from 1976 to 1985. This discrepancy can be attributed to a fundamental change in the structure of the U.S. economy, for example, a declining manufacturing sector or an increase in the efficiency with which energy is used in the production process. In the second chapter I explore the effects of alternative measures of energy price shocks on economic activity and examine the relative performance of these alternative measures in forecasting macroeconomic activity. The alternative energy prices I consider are: gasoline, diesel, natural gas, heating oil and electricity. I find that alternative measures of energy price shocks produce different patterns of impulse responses than oil price shocks. The overwhelming evidence indicates that alternative energy price models, excluding a model containing gasoline prices, outperforms the baseline model containing oil prices for many states, particularly at short-to-mid forecast horizons. In the third chapter, which is coauthored with Lance Bachmeier, we determine whether accounting for oil price endogeneity is important when predicting state-level economic activity. We find that accounting for endogeneity matters for in-sample fit for most states. Specifically, in-sample fit would be improved by using a larger model which contains both regular oil price and endogenous oil price movements. However, we conclude that accounting for endogeneity is not important for out-of-sample forecast accuracy, and a simple model containing only the change in the price of oil produces equally accurate forecasts. Accounting for endogeneity is particularly important in an environment in which rising oil prices were caused by a growing global economy, such as in the years 2004-2007.
Author: Naafey Sardar
Publisher:
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Languages : en
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This dissertation consists of three essays. The first essay estimates the difference in the response of non-gasoline consumption spending to gasoline expenditure shocks across recessions and expansions. Using a nonlinear structural VAR (SVAR) model estimated on quarterly U.S. data for the period 1973-2018, we find that shocks to gasoline expenditures are followed by a much larger reduction in consumption if the shock occurs during a recession than if it occurs in an expansion. We also find a big difference in the response of personal savings to a gasoline expenditure shock depending on whether the economy is in a recession or expansion. This points to precautionary saving behavior as a source of the asymmetry in the response of consumption. We conclude that consumption forecasts should account for this asymmetry. The second essay asks whether El Nino-Southern Oscillation (ENSO) has asymmetric impacts on U.S. food and agricultural stock prices. Using weekly data from 1990 through 2019, we find support for the hypothesis that food and agricultural stock prices respond asymmetrically to ENSO shocks. In particular, we provide evidence that El Nino shocks typically decrease or have no effect on U.S. food and agricultural stock prices, whereas La Nina shocks generally increase prices. Our results are robust to a variety of robustness checks. The third essay estimates the effect of the 1999-2007 oil price spike on U.S. manufacturing employment. Using local labor market data, we estimate the change in U.S. manufacturing employment that can be explained by oil price movements that can plausibly be considered exogenous with respect to the U.S. economy. Our estimates suggest that the oil price spike may have been responsible for the movement of more than two million workers out of the manufacturing sector. When controlling for the effect of the oil price spike on manufacturing employment, the effect of import competition from China found by Autor, Dorn, and Hansen (2013) falls by more than 20%, with the estimated effect on less-educated workers declining by 26%.
Author: Hoai Bao Nguyen
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This thesis is a collection of five self contained empirical macroeconomic papers on the asymmetric effects of energy price shocks on various economies. Chapter 1 formally determines the number of regime changes in the US natural gas market by employing a MS-VAR model. Estimated using Bayesian methods, three regimes are identified for the period 1980 - 2016, namely, before the Decontrol Act, after the Decontrol Act and the Recession. The results show that the natural gas market tends to be much more sensitive to market fundamental shocks occurring in a Recession regime than in the other regimes. Augmenting the model by incorporating the price of crude oil, the results reveal that the impacts of oil price shocks on natural gas prices are relatively small. Chapter 2 provides new empirical evidence on the asymmetric reactions of the U.S. natural gas market and the U.S. economy to its market fundamental shocks in different phases of the business cycle. To this end, we employ a ST-VAR model to capture the asymmetric responses depending on economic conditions. Our results indicate that in contrast to the prediction made by a linear VAR model, the STVAR model provides a plausible explanation to the behavior of the U.S. natural gas market, which asymmetrically reacts in bad times and good times. Chapter 3 examines the relationship between China's economic growth and global oil market fluctuations between 1992Q1 and 2015Q3. We find that: (1) the time varying parameter VAR with stochastic volatility provides a better fit as compared to it's constant counterparts; (2) the impacts of intertemporal global oil price shocks on China's output are often small and temporary in nature; (3) oil supply and specific oil demand shocks generally produce negative movements in China's GDP growth whilst oil demand shocks tend to have positive effects; (4) domestic output shocks have no significant impact on price or quantity movements within the global oil market. Chapter 4 examines the effects of world energy price shocks on China's macroeconomy. We propose a new index of primary commodity energy prices which accurately reflects both the structure of China's energy expenditure shares, as well as intertemporal fluctuations in international energy prices. The index is then in employed a sufficiently rich set of time varying BVARs, identified by a new set of agnostic sign restrictions. Uniformly sized positive energy price shocks are shown to consistently generate economic stagflation over the past two decades. Chapter 5 compares the macroeconomic effects of global oil and iron ore price shocks on the Australian economy. The main results suggest that, over the period 1990Q1 to 2014Q4, the oil shock has a relative larger impact than that of the iron ore shock on output and inflation while the iron ore shock is the dominant source of interest and exchange rate movements. The effects crucially depend on the underlying sources of oil or iron ore price shifts.
Author: Romita Mukherjee
Publisher:
ISBN:
Category :
Languages : en
Pages : 464
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A large volume of research has acknowledged the role of oil price shocks to generate a significant stagflationary impact on U.S. and other oil importing nations. Recent research however shows a paradigm shift in this oil price-macroeconomy relationship since the mid 1980s, during which the U.S. economy has been relatively resilient to oil shocks. Both output contraction and inflationary expectations have been milder in the post mid 1980s than before. But the 2007-08 oil shock episode has re-emphasized the immense impact of the ebbs and flows of oil prices on the U.S. economys ups and downs. Global oil price peaked at $148 a barrel in June 2008. With the mortgage crisis and credit crunch, oil was another blow too many. The U.S. economy swamped into one of the greatest recessions of all times. According to Hamilton (2009), the 2007-08 oil shock had a significant contribution to the recent recession. While a lot of work have been done on the effects of oil price shocks on the U.S. economy, relatively little work has investigated what triggers oil price increase. My research illustrates why it is important to study the cause of an oil price rise. First, the effects of oil price rise on the macro variables depend heavily on what causes the shock. Secondly, whereas the oil price hikes of the 1970s and early 1980s can mostly be attributed to exogenous events in OPEC (Arab Oil Embargo, Iran-Iraq War, Iranian Revolution), a significant source of oil price spikes in the post mid 1980 era have been an increase in global oil demand confronting stagnating oil production. From a policy perspective, of course, policies aimed at dealing with higher oil prices must take careful account of what causes oil prices to rise. Empirical research that demonstrates the resilience of U.S. economy to oil price shocks builds on the implicit assumption that as oil price varies, everything else in the global economy is held constant. Thus all variations in oil prices are taken as alike and exogenous. This overlooks the possibility that oil price rise sparked off by diverse events can potentially lead to different repercussions. This thesis is an attempt to develop framework to study the endogenous increase in oil price. The oil price increase arises from increase in U.S. growth rate, increase in foreign growth rate and a purely exogenous oil supply shock by OPEC. The most important result is that the source of oil price rise has changed after the mid 1980s - whereas before the mid 1980s, bulk of the variation in oil price was due to supply shocks by OPEC, post mid 1980s, most of the variation in oil price is explained by increase in U.S. and foreign growth. Furthermore, if the origin of the oil price rise is the same, then the responses of most U.S. macroeconomic variables display remarkable similarity in the pre and post mid 1980s. This result gives us a new way to look at the resilience of the U.S. economic activity to oil price rise since the mid 1980s. The resilience can be explained to a significant extent by the fact that the type of shocks resulting in oil price rise has changed.
Author: H.G. Huntington
Publisher: Elsevier
ISBN: 1483295451
Category : Business & Economics
Languages : en
Pages : 350
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Large-scale macroeconomic models have been used extensively to analyze a wide range of important economic issues. They were originally developed to study the economy's response to monetary and fiscal policies. During the 1970s these models were expanded and revised to track the inflationary processes and to incorporate key energy variables so that they could be used to examine the impacts of energy price shocks.This study compares the responses of 14 prominent macroeconomic models to supply-side shocks in the form of sudden energy price increases or decreases and to policies for lessening the impacts of price jumps. Four energy price shocks were examined: oil price increases of 50 and 20 percent, an oil price reduction of 20 percent, and an 80 percent increase in domestic natural gas prices. Five policy responses were considered for offsetting the GNP impacts of the larger oil price increase: monetary accommodation, an income tax rate reduction, an increase in the investment tax credit for equipment, a reduction in the employer's payroll tax rate, and an oil stockpile release.The study was conducted by a working group comprised of about 40 modelers and potential model users from universities, business, and government. As in previous EMF studies, the group pursued two broad goals. Firstly, they sought to understand the models themselves by identifying important similarities as well as structural differences. Secondly, they sought to use the models to sharpen their understanding of energy shocks and of the related policy issues. Their conclusions appear as the first chapter in this volume, the remaining chapters providing more technical treatment of the key structural differences among the participating models as well as their use for evaluating energy policies.This volume is addressed particularly to those interested in the energy shock issue, as well as to those with a broader interest in macroeconomic models and policies.
Author: Douglas R. Bohi
Publisher: Routledge
ISBN: 1317366433
Category : Business & Economics
Languages : en
Pages : 96
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The oil price shocks of the 1970’s led to severe recessions in the 1980’s in the United States. Originally published in 1989 in the aftermath, Bohi attempts to show both how energy prices can cause a decline in output and employment and to explore important other factors which led to the recessions using the US, United Kingdom, Japan and Germany as examples. The findings in Energy Price Shocks and Macroeconomic Performance have major implications for energy policy and questions government plans which focus solely on preventing another oil supply disruption. This title will be of interest to students of environmental studies and economics as well as professionals.
Author: Ibrahim Unalmis
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Tatiana Lysenko
Publisher:
ISBN:
Category :
Languages : en
Pages : 215
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After several years of low and stable prices for its gas exports to CIS countries, Russia has decided to review these arrangements and to significantly increase prices, bringing them closer to the levels applied to the EU. The steep increase in energy prices has significant economic implications for the importing countries. So far, the economic analysis has tended to adopt a country-specific focus. We adopt a crosscountry perspective instead, comparing the macroeconomic effects of the energy-price shock on growth, macroeconomic stability, budget and balance of payments. The analysis shows that the expected negative effects associated with the gas price shock have not led to a GDP loss in any of the countries studied, mainly due to a combination of counterbalancing factors. However, some of these developments may raise concerns for the future. In particular the steep increase in private and quasi-private external debt observed over 2006 in most countries increases their vulnerability to future exogenous shocks, including further raises in energy prices.
Author: Mr. Kangni R Kpodar
Publisher: International Monetary Fund
ISBN: 1616356154
Category : Business & Economics
Languages : en
Pages : 34
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This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
Author: Sung Wook Hong
Publisher:
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Languages : en
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This dissertation examines three important issues in energy markets: price dynamics, information flow, and structural change. We discuss each issue in detail, building empirical time series models, analyzing the results, and interpreting the findings. First, we examine the contemporaneous interdependencies and information flows among crude oil, natural gas, and electricity prices in the United States (US) through the multivariate generalized autoregressive conditional heteroscedasticity (MGARCH) model, Directed Acyclic Graph (DAG) for contemporaneous causal structures and Bernanke factorization for price dynamic processes. Test results show that the DAG from residuals of out-of-sample-forecast is consistent with the DAG from residuals of within-sample-fit. The result supports innovation accounting analysis based on DAGs using residuals of out-of-sample-forecast. Second, we look at the effects of the federal fund rate and/or WTI crude oil price shock on US macroeconomic and financial indicators by using a Factor Augmented Vector Autoregression (FAVAR) model and a graphical model without any deductive assumption. The results show that, in contemporaneous time, the federal fund rate shock is exogenous as the identifying assumption in the Vector Autoregression (VAR) framework of the monetary shock transmission mechanism, whereas the WTI crude oil price return is not exogenous. Third, we examine price dynamics and contemporaneous causality among the price returns of WTI crude oil, gasoline, corn, and the S&P 500. We look for structural break points and then build an econometric model to find the consistent sub-periods having stable parameters in a given VAR framework and to explain recent movements and interdependency among returns. We found strong evidence of two structural breaks and contemporaneous causal relationships among the residuals, but also significant differences between contemporaneous causal structures for each sub-period. The electronic version of this dissertation is accessible from http://hdl.handle.net/1969.1/148354
