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The Oil Story: Is it Still the Same?

Author

Listed:
  • Swati Singh

    (MSE)

  • Naveen Srinivasan

    ((Corresponding author) Professor, Madras School of Economics, Chennai, India)

Abstract

It is not to be doubted that the oil price shocks adversely impact the economy. Enough literature is present in support of this fact but, at the same time, it is equivalently important to determine the changing nature of this relationship. This paper studies the changing behavior of this relation from 1948-2018 and shows that the oil prices are no more as effective in explaining the changes in the output of the economy as it had been before the 1970s. Our results also show the extent to which oil intensity has reduced in effecting the output of the US economy along with explaining the short term and long term impacts of oil shocks. Through variance decomposition analysis, the paper explains the reason for this decline in oil importance in recent time. Various factors like changing technology and political and strategic implications are found to be a few of the many reasons behind this change.

Suggested Citation

  • Swati Singh & Naveen Srinivasan, 2020. "The Oil Story: Is it Still the Same?," Working Papers 2020-197, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2020-197
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    References listed on IDEAS

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    More about this item

    Keywords

    Macroeconomic Fluctuations; Oil shocks; Energy and the Macroeconomy; ARDL Model; VAR; Granger causality test; Error Variance Decomposition;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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