Using financial markets information to identify oil supply shocks in a restricted VAR

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Title: Using financial markets information to identify oil supply shocks in a restricted VAR
Author: Melolinna, Marko
Organization: Suomen Pankki
Series: Bank of Finland Research Discussion Papers
Series number: 9/2008
Year of publication: 2008
Publication date: 8.3.2008
Published in: Ilmestynyt myös Finnish Economic Papers 24 ; 1 ; 2011 sekä European Central Bank. Working paper series 1318 ; 2011.
Pages: 38 s.
Keywords: Suomi; Ruotsi; inflaatio; rahoitusmarkkinat; informaatio; bkt; öljy; tarjonta; futuurit; häiriöt; mallit; menetelmät; VAR
JEL: C01; E32; E44
Abstract: This paper introduces a methodology for identifying oil supply shocks in a restricted VAR system for a small open economy. Financial market information is used to construct an identification scheme that forces the response of the restricted VAR model to an oil shock to be the same as that implied by futures markets. Impulse responses are then calculated by using a bootstrapping procedure for partial identification. The methodology is applied to Finland and Sweden in illustrative examples in a simple 5-variable model. While oil supply shocks have an inflationary effect on domestic inflation in these countries during the past decade or so, the effect on domestic GDP is more ambiguous. Keywords: oil futures, partial identification, macroeconomic shocks JEL classification numbers: C01, E32, E44
Rights: https://helda.helsinki.fi/bof/copyright


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