IDEAS home Printed from https://ideas.repec.org/a/wly/revfec/v2y1992i1p1-16.html
   My bibliography  Save this article

The Inflationary Impact Of Oil Price Shocks: A Vector Autoregressive Study

Author

Listed:
  • Keivan Deravi
  • Charles E. Hegji

Abstract

The paper estimates a seven‐variable vector autoregressive model of the U.S. economy over the period 1970.1 to 1990.4. Forecast error variance and impulse analysis are performed on the estimated system to determine the inflationary impact of increases in the price of oil over this period. The analysis shows that a negligible percentage of inflation's forecast error variance can be attributable to increases in the price of oil. Moreover, the impulse simulations result in negative Consumer Price responses to increases in the price of oil. The primary response to a positive shock in the price of oil was a decrease in real output. The results, in general, support previous studies emphasizing the demand‐side of response to oil price shocks rather than shifts in aggregate supply.

Suggested Citation

  • Keivan Deravi & Charles E. Hegji, 1992. "The Inflationary Impact Of Oil Price Shocks: A Vector Autoregressive Study," Review of Financial Economics, John Wiley & Sons, vol. 2(1), pages 1-16, September.
    • Handle: RePEc:wly:revfec:v:2:y:1992:i:1:p:1-16
    DOI: 10.1002/j.1873-5924.1992.tb00552.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/j.1873-5924.1992.tb00552.x
    Download Restriction: no
    File URL: https://libkey.io/10.1002/j.1873-5924.1992.tb00552.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Kenneth N. Kuttner, 1989. "Monetary and non-monetary sources of inflation: an error correction analysis," Working Paper Series, Macroeconomic Issues 89-15, Federal Reserve Bank of Chicago.
    3. Preston J. Miller & Thomas M. Supel & Thomas H. Turner, 1980. "Estimating the effects of the oil-price shock," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 4(Win).
    4. Martin S. Eichenbaum, 1991. "Technology shocks and the business cycle," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 15(Mar), pages 14-31.
    5. Norman S. Fieleke, 1990. "Oil shock III?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-10.
    6. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    7. Chan Guk Huh & Bharat Trehan, 1991. "Real business cycles: a selective survey," Economic Review, Federal Reserve Bank of San Francisco, issue Spr, pages 3-17.
    8. Jack L. Hervey, 1990. "Oil and competition in world markets," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Nov.
    9. Ahmed, Ehsan & Rosser, J. Jr. & Sheehan, Richard G., 1988. "A global model of OECD aggregate supply and demand using vector autoregressive techniques," European Economic Review, Elsevier, vol. 32(9), pages 1711-1729, November.
    10. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    11. Blanchard, Olivier Jean, 1989. "A Traditional Interpretation of Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 79(5), pages 1146-1164, December.
    12. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    13. Thomas M. Humphrey, 1990. "Ricardo versus Thornton on the appropriate monetary response to supply shocks," Economic Review, Federal Reserve Bank of Richmond, vol. 76(Nov), pages 18-24.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Evans, Charles L. & Marshall, David A., 2007. "Economic determinants of the nominal treasury yield curve," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1986-2003, October.
    2. Jeremy Smith & Chris Murphy, 1994. "Macroeconomic Fluctuations in the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 70(209), pages 133-148, June.
    3. Charles L. Evans & David A. Marshall, 2009. "Fundamental Economic Shocks and the Macroeconomy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(8), pages 1515-1555, December.
    4. Kenneth N. Kuttner, 1992. "Monetary policy with uncertain estimates of potential output," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 16(Jan), pages 2-15.
    5. Ramey, V.A., 2016. "Macroeconomic Shocks and Their Propagation," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 71-162, Elsevier.
    6. Francisco J. Goerlich-Gisbert, 1999. "Shocks agregados versus shocks sectoriales. Un análisis factorial dinámico," Investigaciones Economicas, Fundación SEPI, vol. 23(1), pages 27-53, January.
    7. Guerini, Mattia & Moneta, Alessio, 2017. "A method for agent-based models validation," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 125-141.
    8. Charles A. Fleischman, 1999. "The causes of business cycles and the cyclicality of real wages," Finance and Economics Discussion Series 1999-53, Board of Governors of the Federal Reserve System (U.S.).
    9. Dr. Godwin Chukwudum Nwaobi, 2004. "Modelling Economic Fluctuations In Subsaharan Africa:A Vector Autoregressive Approach," Macroeconomics 0406008, University Library of Munich, Germany.
    10. Wang, Peng-fei & Wen, Yi, 2005. "Endogenous money or sticky prices?--comment on monetary non-neutrality and inflation dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 29(8), pages 1361-1383, August.
    11. Iwaisako, Tokuo & Nakata, Hayato, 2017. "Impact of exchange rate shocks on Japanese exports: Quantitative assessment using a structural VAR model," Journal of the Japanese and International Economies, Elsevier, vol. 46(C), pages 1-16.
    12. Tripier, Fabien, 2006. "Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2749-2774, December.
    13. Fabrice Collard & Patrick Fève, 2012. "Sur les causes et les effets en macro économie : les Contributions de Sargent et Sims, Prix Nobel d'Economie 2011," Revue d'économie politique, Dalloz, vol. 122(3), pages 335-364.
    14. Mishra, Prachi & Montiel, Peter & Pedroni, Peter & Spilimbergo, Antonio, 2014. "Monetary policy and bank lending rates in low-income countries: Heterogeneous panel estimates," Journal of Development Economics, Elsevier, vol. 111(C), pages 117-131.
    15. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March.
    16. Emanuele BACCHIOCCHI & Riccardo Jack LUCCHETTI, 2015. "Structure-Based SVAR Identification," Departmental Working Papers 2015-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    17. Johannes W. Fedderke, 2022. "Identifying supply and demand shocks in the South African Economy, 1960–2020," South African Journal of Economics, Economic Society of South Africa, vol. 90(3), pages 349-389, September.
    18. Ambler, Steven & Cardia, Emanuela & Phaneuf, Louis, 1992. "Contrats de salaire, croissance endogène et fluctuations," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(1), pages 175-204, mars et j.
    19. Stock, J.H. & Watson, M.W., 2016. "Dynamic Factor Models, Factor-Augmented Vector Autoregressions, and Structural Vector Autoregressions in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 415-525, Elsevier.
    20. Cochrane, John H., 1994. "Shocks," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 295-364, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:revfec:v:2:y:1992:i:1:p:1-16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1873-5924 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.