What is an Oil Shock

By James D. Hamilton. 2003

2,322 citations recorded by the source corpus.

This paper uses a flexible approach to characterize the nonlinear relation between oil price changes and GDP growth. The paper reports clear evidence of nonlinearity, consistent with earlier claims in the literature-- oil price increases are much more important than oil price decreases, and increases have significantly less predictive content if they simply correct earlier decreases. An alternative interpretation is suggested based on estimation of a linear functional form using exogenous disruptions in petroleum supplies as instruments. The evidence suggests that oil shocks matter because they disrupt spending by consumers and firms on certain key sectors.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/18299179bd24a68abd08f79cd4ad992d6f129d6e

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Citations in the corpus

Oil shock transmission to stock market returns: Wavelet-multivariate Markov switching GARCH approach (2012, background): “Importantly, Hamilton [15] has settled that non-linear specifications should be seen as better candidatemodels than traditional linear approaches in capturing significantly much more stronger effects of oil shocks.”
Asymmetric Impact of Oil Price Shock on Stock Market in China: A Combination Analysis Based on SVAR Model and NARDL Model (2017, background): “Soaring and plunging of oil price before and after the financial crisis in 2008 is partly resulted from the precautionary shock of oil market, which is consistent with what Hamilton (2009) pointed out that the oil price movements in 2008 defied an explanation in terms of the fundamentals.”
Does age structure forecast economic growth (2007, neutral): “For example, Hamilton (2003) examines the effect of oil price shocks on macroeconomic performance and Easterly (2001) links the slow growth in the developing countries after 1980 to slow growth in the developed world and high world interest rates.”
Oil price shocks and real GDP growth: empirical evidence for some OECD countries (2005, background): “4More recently, Hamilton (2003) and Jiménez-Rodrı́guez (2004) also found evidence of a non-linear relationship between the two variables for the US economy.”
The value of fiscal discipline for oil-exporting countries (2012, background): “…prices, in which case they treat them as non-stationary, introducing measures such as the net oil price increase or price changes into their VAR systems (see for example Hamilton (1983), Hamilton (1996), Hamilton (2003), Bernanke, Gertler, and Waston (1997), Leduc and Sill (2004), among others).”
Asymmetries in the response of economic activity to oil price increases and decreases (2015, neutral): “[24] Hamilton, James D.”
Renewable energy, oil prices, and economic activity: A Granger-causality in quantiles analysis (2018, background): “Nevertheless, Hamilton (1996) restored a significant relationship between oil prices and economic growth (1948-1994) by introducing the concept of net oil prices increase in a VAR model for the U.”