Macroeconomic Effects of Precautionary Demand for Oil

We evaluate the macroeconomic effects of shocks specific to the oil market, which mainly reflect fluctuations in precautionary demand for oil driven by uncertainty about future supplies. A two-stage identification procedure is used. First, daily changes in the futures–spot price spread proxy for pre...

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Bibliographic Details
Published in:Journal of applied econometrics (Chichester, England) England), 2015-09, Vol.30 (6), p.968-986
Main Authors: Anzuini, Alessio, Pagano, Patrizio, Pisani, Massimiliano
Format: Article
Language:English
Subjects:
Crude oil prices
Econometrics
Economic impact
Macroeconomics
Recessions
Studies
United States
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Summary:We evaluate the macroeconomic effects of shocks specific to the oil market, which mainly reflect fluctuations in precautionary demand for oil driven by uncertainty about future supplies. A two-stage identification procedure is used. First, daily changes in the futures–spot price spread proxy for precautionary demand shocks and the path of oil prices is estimated. This information is then exploited to restrict the oil price response in a vector autoregression. Impulse responses suggest that such shocks reduce output and raise prices. Historical decomposition shows that they contributed significantly to the US recessions in the 1990s and in the early 2000s, but not to the most recent slump.
ISSN:0883-7252
1099-1255
DOI:10.1002/jae.2419