Identifying Shocks on the Economic Fluctuations in Indonesia and US: The Role of Oil Price Shocks in a Structural Vector Autoregression Model

Mansur, Alfan (2015): Identifying Shocks on the Economic Fluctuations in Indonesia and US: The Role of Oil Price Shocks in a Structural Vector Autoregression Model.

Abstract

In this paper, the sources of the Indonesian economic slowdown as well as US economic fluctuations are investigated within a range of four-variable structural vector autoregression models. Identification is attained either through the combination of short-run and long-run restrictions or the more recent sign restrictions. The results show that both economies are not affected by disturbances in the same way. Indonesian economic output is lowered by falling contribution of oil price shocks, negative aggregate supply shocks and tightening monetary policy. Meanwhile, the US economy is mainly driven by aggregate supply shocks. The effect of oil price disturbance to the US itself declines over time and the monetary policy shocks no longer hurt the US economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic fluctuations, oil price shocks, Structural Vector Autoregression
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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