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Federal Reserve Bank of San Francisco
Working Paper Series
Measuring oil-price shocks using market-based information
Michele Cavallo
Tao Wu

We develop two measures of exogenous oil-price shocks for the period 1984 to 2006 based on market commentaries on daily oil-price fluctuations. Our measures are based on exogenous events that trigger substantial fluctuations in spot oil prices and are constructed to be free of endogenous and anticipatory movements. We find that the dynamic responses of output and prices implied by these measures are "well behaved." We also find that the response of output is larger than the one implied by a conventional measure of oil-price shocks proposed in the literature.

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Michele Cavallo & Tao Wu, Measuring oil-price shocks using market-based information, Federal Reserve Bank of San Francisco, Working Paper Series 2006-28, 2006.
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Keywords: Petroleum products - Prices ; Petroleum industry and trade
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