Arora, Vipin and Lieskovsky, Jozef (2012): Natural Gas and U.S. Economic Activity.
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Abstract
Previous empirical work has shown that real natural gas prices have a small to negligible impact on total U.S. industrial production and most of its sub-indices. We first show that these results still hold with a sample that runs through mid-2012 and uses a different natural gas price. Concerns about the joint determination of the real natural gas price and U.S. economic activity lead us to reassess these results using a multivariate framework. Our model shows that natural gas does affect U.S. economic activity, but primarily through changes in natural gas production. We also show that natural gas supply, inventory demand, and responses to events in the oil market have been the most important contributors to the real natural gas price since 2000. In terms of approximate point estimates, our results indicate that increases in natural gas supply can raise total U.S. industrial production by 0.1 to 0.5 percent under plausible scenarios.
Item Type: | MPRA Paper |
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Original Title: | Natural Gas and U.S. Economic Activity |
Language: | English |
Keywords: | Natural gas; VAR; Granger causality; endogenous; industrial production |
Subjects: | F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F47 - Forecasting and Simulation: Models and Applications E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy |
Item ID: | 42659 |
Depositing User: | Vipin Arora |
Date Deposited: | 18 Nov 2012 13:52 |
Last Modified: | 28 Sep 2019 05:22 |
References: | Arora, Vipin and Pedro Gomis-Porqueras, "Oil Price Dynamics in a Real Business Cycle Model," Working Paper 2011-17, CAMA 2011. Barsky, Robert B. and Lutz Kilian, "Oil and the Macroeconomy Since the 1970s," Journal of Economic Perspectives, 2004, 18 (4), 115-134. Burbridge, John and Alan Harrison, "A Historical Decomposition of the Great Depression to Determine the Role of Money," Journal of Monetary Economics, 1985, 16, 45-54. Cunado, Juncal and Fernando Perez de Gracia, "Do Oil Price Shocks Matter? Evidence for Some European Countries," Energy Economics, 2003, 25, 137-154. Hamilton, James D., "This is What Happended to the Oil Price-Macroeconomy Relationship," Journal of Monetary Economics, 1996, 38, 215-220. Hooker, M.A., "What Happened to the Oil Price-Macroeconomy Relationship?," Journal of Monetary Economics, 1996, 38, 195-213. Kilian, Lutz, "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, 2008, 46 (4), 871-909. -, "Not All Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, 2009, 99 (3), 1053-1069. -, and Dan Murphy, "The Role of Inventories and Speculative Trading in the Global Market for Crude Oil," Mimeo 2012. Kliesen, Kevin L., "Rising Natural Gas Prices and Real Economic Activity," Federal Reserve Bank of St. Louis Review, 2006, 88 (6), 511-526. Ramberg, David J. and John E. Parsons, "The Weak Tie Between Natural Gas and Oil Prices," The Energy Journal, 2012, 33 (2), 13-35. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/42659 |
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