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Macroeconomic effects of precautionary demand for oil

Author

Listed:
  • Alessio Anzuini

    (Bank of Italy)

  • Patrizio Pagano

    (Bank of Italy)

  • Massimiliano Pisani

    (Bank of Italy)

Abstract

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 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 VAR. Impulse responses suggest that such shocks reduce output and raise prices. Historical decomposition shows that they contributed significantly to the U.S. recessions in the 1990s and in the early 2000s, but not to the most recent slump.

Suggested Citation

  • Alessio Anzuini & Patrizio Pagano & Massimiliano Pisani, 2013. "Macroeconomic effects of precautionary demand for oil," Temi di discussione (Economic working papers) 918, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_918_13
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    vector autoregression; oil shock; futures; news;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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