Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications

Leduc, Sylvain; Moran, Kevin; Vigfusson, Robert J.

doi:10.17016/ifdp.2016.1179

“…Oil supply could be modeled as inLeduc et al (2016) as having very persistent and transitory components. For parsimony and consistency with Bodenstein et al(2013), we elected to show separately the two cases of high and low persistence.…”

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confidence: 99%

Oil, Equities, and the Zero Lower Bound

Datta

¹

,

Johannsen

²

,

Kwon³

et al. 2018

FEDS

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From late 2008 to 2017, oil and equity returns were more positively correlated than in other periods. In addition, we show that both oil and equity returns became more responsive to macroeconomic news. We provide empirical evidence and theoretical justification that these changes resulted from nominal interest rates being constrained by the zero lower bound (ZLB). Although the ZLB alters the economic environment in theory, supportive empirical evidence has been lacking. Our paper provides clear evidence of the ZLB altering the economic environment, with implications for the effectiveness of fiscal and monetary policy.

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“…Additional analysis regarding the differences between the 2004 and 2007 oil price increases can be found in Leduc et al. ().…”

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confidence: 99%

The Role of Oil Price Shocks in Causing U.S. Recessions

Kilian¹,

Vigfusson²

2017

J of Money Credit Banking

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Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide the first formal analysis of this question with special attention to the possible role of net oil price increases in amplifying the transmission of oil price shocks. We quantify the conditional recessionary effect of oil price shocks in the net oil price increase model for all episodes of net oil price increases since the mid-1970s. Compared to the linear model, the cumulative effect of oil price shocks over course of the next two years is much larger in the net oil price increase model. For example, oil price shocks explain a 3% cumulative reduction in U.S. real GDP in the late 1970s and early 1980s and a 5% cumulative reduction during the financial crisis. An obvious concern is that some of these estimates are an artifact of net oil price increases being correlated with other variables that explain recessions. We show that the explanatory power of oil price shocks largely persists even after augmenting the nonlinear model with a measure of credit supply conditions, of the monetary policy stance and of consumer confidence. There is evidence, however, that the conditional fit of the net oil price increase model is worse on average than the fit of the corresponding linear model, suggesting much smaller cumulative effects of oil price shocks for these episodes of at most 1%.

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“…7. Additional analysis regarding the differences between the 2004 and 2007 oil price increases can be found in Leduc et al (2016). oil price increase sometimes is followed by deeper recessions than at other times. This perspective is new to the literature.…”

Section: The Relationship Between the Real Price Of Oil And Us Realmentioning

confidence: 99%

The Role of Oil Price Shocks in Causing U.S. Recessions

Vigfusson

¹

,

Kilian

²

2014

Int. finance discuss. pap.

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Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide a formal analysis of this question with special attention to the possible role of net oil price increases in amplifying the transmission of oil price shocks. We quantify the conditional effect of oil price shocks in the net oil price increase model for all episodes of net oil price increases since the mid-1970s, analyze its determinants, and show that the linear model fits the data better.JEL codes: E32, E37, E51, Q43

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Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications

Cited by 9 publications

References 17 publications

Oil, Equities, and the Zero Lower Bound

Oil, Equities, and the Zero Lower Bound

The Role of Oil Price Shocks in Causing U.S. Recessions

The Role of Oil Price Shocks in Causing U.S. Recessions

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