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150 YEARS OF THE OIL PRICE–MACROECONOMY RELATIONSHIP

Published online by Cambridge University Press:  28 June 2017

Apostolos Serletis  and
Elaheh Asadi Mehmandosti
Apostolos Serletis*
Affiliation:
University of Calgary
Elaheh Asadi Mehmandosti
Affiliation:
Alzahra University
*
Address correspondence to: Apostolos Serletis, Department of Economics, University of Calgary, Calgary, Alberta T2N 1N4, Canada; e-mail: [email protected]; URL: http://econ.ucalgary.ca/serletis.htm.
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Abstract

We use the longest span data that have ever been studied before (from 1870 to 2014) to investigate the relationship between the price of oil and the level of economic activity in the United States. In the context of a bivariate (identified) structural generalized autoregressive conditional heteroscedasticity (GARCH)-in-Mean VAR in real output growth and the change in the real price of oil, we find that uncertainty about oil prices has had a negative and significant effect on real output. We also find that the responses of real output growth to positive and negative shocks are not very informative of whether they are symmetric or asymmetric, and that accounting for oil price uncertainty tends to amplify the negative dynamic response of real output growth to unfavorable (positive) oil price shocks.

Keywords

Oil Price VolatilityReal OptionsMultivariate GARCH-in-Mean VAR
Type
Notes
Information
Macroeconomic Dynamics , Volume 23 , Issue 3 , April 2019 , pp. 1302 - 1311
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

We would like to thank John Elder and Libo Xu for comments that greatly improved the paper.

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