Title

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

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