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"A good case can therefore be made that rather than studying the response to an average oil price shock, one ought to consider the response of U.S. real GDP to
by okl 5y ago
"A good case can therefore be made that rather than studying the response to an average oil price shock, one ought to consider the response of U.S. real GDP to each type of oil demand and oil supply shock. This would require a different class of econometric models that explicitly incorporates quarterly U.S. real GDP growth into a structural model of the global oil market. Such an extended model, building on the work of Kilian and Murphy (2014) and Kilian, would help in understanding the role of the deeper determinants of the real price of oil in explaining recessions, while avoiding the generated regressor problem and loss of degrees of freedom associated with alternative econometric approaches. Developing such a framework is nontrivial, however, because many of the identifying assumptions currently in use in structural oil market models are specific to monthly data, and hence is left for future research."
TL;DR: It's complicated.
And I wouldn't call 80$ oil a "shock", especially in relation to current asset and commodity prices. Look at prices from 2011 to 2014 - was 100$ oil shocking then?
- dahfizz 5y ago> TL;DR: It's complicated. Economic modeling is complicated. The core fact that oil price shocks cause recessions is not. Your response is the reminiscent of a climate change denier saying "See! These two scientists disagree about how to model climate change, therefore it must not be real". > And I wouldn't call 80$ oil a "shock", especially in relation to current asset and commodity prices. Look at prices from 2011 to 2014 - was 100$ oil shocking then? Its not shocking as in "I'm shocked this is the price of oil". Its a price shock as in the price of a commodity rapidly changing. The absolute price doesn't matter as much as the percent change. There's no hard and fast rule about what constitutes a shock, but the price of crude oil has doubled since last November.
- okl 5y ago> therefore it must not be real I've never claimed the opposite. There is space between black and white. Granger causality in economics differs from the classical principle of causality typically used in natural sciences like climatology. My comment was "I'd be careful to derive causality from overlaying charts with stuff."