Munich Personal RePEc Archive

A note on the identification and transmission of energy demand and supply shocks

Michelle, Gilmartin (2016): A note on the identification and transmission of energy demand and supply shocks.

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Abstract

This paper proposes and implements a novel structural VAR approach for identifying oil demand and supply shocks. In this approach we search for two shocks in the context of a VAR model, which explain the majority of the k-step ahead prediction error variances of oil prices. Finally, we compare our approach with alternative identification schemes based on sign restrictions, and we show that the proposed methods is a useful tool for decomposing oil shocks.

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