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Measuring Oil-Price Shocks Using Market-Based Information, Tao Wu, Michele Cavallo

We study the effects of oil-price shocks on the U.S. economy combining narrative and quantitative approaches. After examining daily oil-related events since 1984, we classify them into various event types. We then develop measures of exogenous shocks that avoid endogeneity and predictability concerns. Estimation results indicate that oil-price shocks have had substantial and statistically significant effects during the last 25 years. In contrast, traditional VAR approaches imply much weaker and insignificant effects for the same period. This discrepancy stems from the inability of VARs to separate exogenous oil-supply shocks from endogenous oil-price fluctuations driven by changes in oil demand
Table Of Contents
Cover; Contents; I. Introduction; II. Measures of Exogenous Oil-Price Shocks Based on Market Information; A. A Comprehensive Study of Daily Oil-Related Events; B. Two Measures of Oil-Price Shocks; C. What Does Exogeneity Mean?; D. Constructing Monthly Oil Shock Series; III. Estimating the Effects of Oil-Price Shocks; IV. Empirical Results; A. Impulse Responses of Market-Information-Based Exogenous Oil-Price Shocks; B. Impulse Responses of VAR-Based Measures of Oil-Price Shocks; C. Other Kinds of Oil-Price Shocks Based on Market Information; D. Robustness and Stability; V. Concluding Remarks
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (46 p.)
Specific Material Designation
Form Of Item

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