What is an oil shock?

Hamilton, James D.

doi:10.1016/s0304-4076(02)00207-5

Cited by 1,579 publications

(812 citation statements)

References 43 publications

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“…Hamilton (1996Hamilton ( , 2003 argues that economic agents do not change their behavior in response to small fluctuations in oil price changes. Consequently, an oil price shock is defined as the amount by which the change in the oil price in month t exceeds the maximum value over the previous 3 years 8 .…”

Section: Oil Price Shocks and Empirical Modelsmentioning

confidence: 99%

“…A number of studies have suggested that oil price shocks are one of the main sources of fluctuations in aggregate economic activity (Hamilton, 1996(Hamilton, , 2003. However, linear, symmetric models of the transmission mechanism of oil price shocks have not been able to account for large business cycle fluctuations.…”

Section: Introductionmentioning

confidence: 99%

“…This suggests that the effects of oil price shocks might be different during recessions and expansions. Finally, Hamilton (1996Hamilton ( , 2003 argues that economic agents do not change their behavior in response to small fluctuations in oil price changes. Therefore, output may respond asymmetrically to the size of the oil price shock.…”

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confidence: 99%

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The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

Donayre

Wilmot

2015

SSRN Journal

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A threshold vector autoregression (TVAR) is estimated to study the effects of oil price shocks on Canadian output and price level. While much of the literature has investigated potential asymmetric effects of positive and negative oil price shocks within a linear vector autoregression (VAR), we do so within a nonlinear VAR. Further, we extend the analysis to consider the correlation between asymmetries associated with the business cycle phase and size/sign asymmetries. Positive oil price shocks are found to have a stronger effect on output than negative oil price shocks. This asymmetry is significant in recessions, but lessened during expansions. The results also suggest that the reduction in inflation due to a negative oil price shock is larger than the increase in inflation following a positive oil price shock, especially during periods of low output growth. Yet, neither inflation nor output growth seems to vary disproportionately with the size of the oil price shock. In general, the results are robust to the ordering of the variables in the VAR process and to the time window over which the net oil price change is computed.

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Section: Oil Price Shocks and Empirical Modelsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

Donayre

Wilmot

2015

SSRN Journal

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“…In addition, the unconditional variance is still constant over time. Engle and Rangel (2008) Since the seminal articles of Hamilton (1983Hamilton ( , 1985Hamilton ( , 2003 exogenous oil supply shocks were suspected to be causal for recessions and periods of low economic growth. Based on this presumption, several empirical studies have analyzed the relationship between oil prices and stock market returns.…”

Section: Related Literaturementioning

confidence: 99%

“…Given the empirical evidence in, e.g., Hamilton (1983Hamilton ( , 1985Hamilton ( , 2003 on the negative impact of oil price shocks on economic activity, it does not seem surprising that studies such as Jones and Kaul (1996) also find a negative relationship between oil prices and stock returns. In this article, we revisit the oil-stock market relationship by analyzing the dynamic correlations between crude oil prices and U.S. stock market returns during the period 1993-2011.…”

Section: Introductionmentioning

confidence: 99%

On the Macroeconomic Determinants of the Long-Term Oil-Stock Correlation

2012

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Using a modified DCC-MIDAS specification, we endogenize the long-term correlation between crude oil and stock price returns with respect to the stance of the U.S. macroeconomy. We find that variables which contain information on current and future economic activity are helpful predictors for changes in the oil-stock correlation. For the period 1993-2011 there is strong evidence for a counter cyclical behavior of the long-term correlation. For prolonged periods with strong growth above trend our model predicts a negative long-term correlation, while before and during recessions the sign changes and remains positive throughout the economic recovery. Our results strongly suggest that crude oil prices cannot be viewed as being exogenous with respect to the U.S. macroeconomy and explain the controversial results concerning the oil-stock relationship in previous studies.

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Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry

2012

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This paper investigates the influence of inventories in explaining the magnitude of price transmission. The empirical strategy consists of two distinct steps. First, the flexible nonlinear framework of Hamilton is used to investigate the influence of inventories on price transmission. The procedure detects significant non-linearities and suggests that the price transmission elasticity is increasing in the level of the farm price and decreasing in the ratio of inventories to sales. This evidence leads to specific functional forms for the price transmission and target inventory equations which are estimated in a second step. The estimation procedure accounts for potential simultaneity between sales at the wholesale level and the wholesale price. Our results suggest that price transmission is lower (higher) when inventories are below (above) a target which is function of domestic sales.

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What is an oil shock?

Cited by 1,579 publications

References 43 publications

The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

On the Macroeconomic Determinants of the Long-Term Oil-Stock Correlation

Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry

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