Are the macroeconomic effects of oil price shock symmetric?: A Factor-Augmented Vector Autoregressive approach
Document Type
Article
Publication Date
9-1-2014
Abstract
This paper aims to examine the asymmetric effect of oil price shocks on real economic activity in the U.S. within the context of a nonlinear Factor-Augmented Vector Autoregressive (FAVAR) model. By employing simulation methods, we trace the effects of positive and negative oil price shocks on the macroeconomic variables through the Impulse Response Function (IRF). It is found that the negative impacts of higher oil prices are larger than the positive effects of lower oil prices. And the asymmetric effects are more evident when the oil price shocks are larger. The results are robust to different lag specification and choice of factors.
Publication Title
Energy Economics
Volume
45
First Page
217
Last Page
228
Digital Object Identifier (DOI)
10.1016/j.eneco.2014.06.003
ISSN
01409883
Citation Information
An, Jin, X., & Ren, X. (2014). Are the macroeconomic effects of oil price shock symmetric?: A Factor-Augmented Vector Autoregressive approach. Energy Economics, 45, 217–228. https://doi.org/10.1016/j.eneco.2014.06.003