Not All Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market

  title={Not All Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market},
  author={L. Kilian},
  journal={Macroeconomics eJournal},
  • L. Kilian
  • Published 2006
  • Economics
  • Macroeconomics eJournal
Using a newly developed measure of global real economic activity, a structural decomposition of the real price of crude oil in four components is proposed: oil supply shocks driven by political events in OPEC countries; other oil supply shocks; aggregate shocks to the demand for industrial commodities; and demand shocks that are specific to the crude oil market. The latter shock is designed to capture shifts in the price of oil driven by higher precautionary demand associated with concerns… Expand
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