NONLINEARITIES IN THE OIL PRICE–OUTPUT RELATIONSHIP

By Lutz Kilian, Robert J. Vigfusson. Macroeconomic Dynamics, 2010

283 citations recorded by the source corpus.

It is customary to suggest that the asymmetry in the transmission of oil price shocks to real output is well established. Much of the empirical work cited as being in support of asymmetry, however, has not directly tested the hypothesis of an asymmetric transmission of oil price innovations. Moreover, many of the papers quantifying these asymmetric responses are based on censored oil price VAR models that have recently been shown to be invalid. Other studies are based on dynamic correlations in the data and do not distinguish between cause and effect. Recently, several new methods of testing and quantifying asymmetric responses of U.S. real economic activity to positive and negative oil price innovations have been developed. We put this literature into perspective, contrast it with more traditional approaches, highlight directions for further research, and reconcile some seemingly conflicting results reported in the literature.

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

View Paper: https://www.semanticscholar.org/paper/9fcd5452f2fd6178ea75cefa833fa9340d488edb

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Citations in the corpus

OIL PRICE SHOCKS AND INDUSTRIAL PRODUCTION: IS THE RELATIONSHIP LINEAR? (2011, background): “See, for instance, Gallant et al. (1993) and Koop et al. (1996) in the context of reduced-form models and Kilian and Vigfusson (2011) in the context of structural models.”
Oil Price Shocks: Causes and Consequences (2014, background): “Subsequently, Kilian and Vigfusson (2011a) demonstrated that the asymmetric regression model proposed by Bernanke et al. and widely used in subsequent research is misspecified, making it impossible to infer the responses of real output to oil price shocks or the reaction of the Federal Reserve to…”
The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses (2015, unknown): “26 Kilian and Vigfusson (2011) presents a survey of the literature on the nonlinearities and asymmetries in oil price-output relationship.”
Asymmetries in the response of economic activity to oil price increases and decreases (2015, unknown): “[35] Kilian, Lutz and Robert J.”
Do Oil Prices Help Forecast U.S. Real GDP? The Role of Nonlinearities and Asymmetries (2013, unknown): “, 8}, drawing on the analysis in Kilian and Vigfusson (2011a,b). The main focus is on the net oil price increase transformation of Hamilton (1996, 2003). For completeness, we also include results for an oil price increase specification motivated by Mork’s (1989) analysis, the out-of-sample forecasti”