Hostname: page-component-5cf477f64f-mgq6s Total loading time: 0 Render date: 2025-03-31T13:24:51.671Z Has data issue: false hasContentIssue false
  • English
  • Français

OIL PRICE VOLATILITY: INDUSTRIAL PRODUCTION AND SPECIAL AGGREGATES

Published online by Cambridge University Press:  30 October 2017

John Elder
John Elder*
Affiliation:
Colorado State University
*
Address correspondence to: John Elder, Department of Finance & Real Estate, Colorado State University, 1272 Campus Delivery, Fort Collins, CO 80523-1272USA; email: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Previous research shows that volatility in oil prices has tended to depress output, as measured by nonresidential investment, gross domestic product, and aggregated measures of industrial production in several countries. This paper investigates the effect of oil price volatility on disaggregated measures of industrial production. The disaggregated measures that we examine are the special aggregates by market groups as calculated by the Federal Reserve Board. Our results are reported for three categories of special aggregates: indexes for industrial production excluding two major industries (technology and motor vehicles), energy-related special aggregates, and non-energy-related special aggregates. Our results indicate that among energy-related market groups, the effects of oil price volatility are concentrated in activities related to primary energy generation and oil and gas drilling. Among non-energy-related market groups, oil price volatility affects a broad range of special aggregates, including aggregates sorted by consumer goods and business equipment.

Keywords

Oil VolatilityUncertaintyMultivariate GARCH VARReal Options
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Special Issue 3: Dynamics of Oil and Commodities Prices , April 2018 , pp. 640 - 653
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Bernanke, Benjamin S. (1983) Irreversibility, uncertainty, and cyclical investment. Quarterly Journal of Economics 98, 85–106.CrossRefGoogle Scholar
Bernanke, Benjamin S., Gertler, Mark and Mark Watson (1997) Systematic monetary policy and the effects of oil price shocks. Brookings Papers on Economic Activity 1, 91–142.CrossRefGoogle Scholar
Bredin, Don, Elder, John and Fountas, S. (2011) Oil volatility and the option value of waiting: An analysis of the G-7. Journal of Futures Markets 31, 679–702.CrossRefGoogle Scholar
Brennan, Michael J. (1990) Latent assets. Journal of Finance 45, 709–730.CrossRefGoogle Scholar
Brennan, Michael J. and Schwartz, Eduardo (1985) Evaluating natural resource investment. Journal of Business 58, 1135–1157.Google Scholar
Dixit, Avinash K. and Pindyck, Robert S. (1994) Investment Under Uncertainty. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Elder, John (1995) Macroeconomic and Financial Effects of Monetary Policy and Monetary Policy Uncertainty. Doctoral Dissertation, University of Virginia.Google Scholar
Elder, John (2004) Another perspective on the effects of inflation volatility. Journal of Money, Credit and Banking 36, 911–28.CrossRefGoogle Scholar
Elder, John and Serletis, Apostolos (2010) Oil price uncertainty. Journal of Money, Credit and Banking 42, 1137–1159.CrossRefGoogle Scholar
Hamilton, James D. (2003) What is an oil shock? Journal of Econometrics 113, 363–398.CrossRefGoogle Scholar
Hamilton, James D. (2009) Causes and consequences of the oil shock of 2007–08. Brookings Papers on Economic Activity 1, 215–259.CrossRefGoogle Scholar
Hamilton, James D. (2013) Historical oil shocks. In Parker, Randall E. and Whaples, R. (eds.), Routledge Handbook of Major Events in Economic History, pp. 239–265. New York: Routledge Taylor and Francis Group.Google Scholar
Hamilton, James D. and Herrera, Ana (2004) Oil shocks and aggregate macroeconomic behavior: The role of monetary policy. Journal of Money, Credit and Banking 36, 265–286.CrossRefGoogle Scholar
Jo, Soojin (2014) The effect of oil price uncertainty on global real economic activity. Journal of Money, Credit and Banking 46, 1113–1135.CrossRefGoogle Scholar
Kilian, Lutz (2008) The economic effects of energy price shocks. Journal of Economic Literature 46, 871–909.CrossRefGoogle Scholar
Majd, Saman and Pindyck, Robert S. (1987) Time to build, option value, and investment decisions. Journal of Financial Economics 18, 7–27.CrossRefGoogle Scholar