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Pitfalls in estimating asymmetric effects of energy price shocks
A common view in the literature is that the effect of energy price shocks on macroeconomic aggregates is asymmetric in energy price increases and decreases. We show that widely used asymmetric vector autoregressive models of the transmission of energy price shocks are misspecified, resulting in inconsistent parameter estimates, and that the implied impulse responses have been routinely computed incorrectly. As a result, the quantitative importance of unanticipated energy price increases for the U.S. economy has been exaggerated. In response to this problem, we develop alternative regression ...
Why and when do spot prices of crude oil revert to futures price levels?
Recent studies of crude oil price formation emphasize the role of interest rates and convenience yield (the adjusted spot-futures spread), confirming that spot prices mean-revert and normally exceed discounted futures. However, these studies don't explain why such "backwardation" is normal. Also, models derived in these studies typically explain only about 1 percent of daily returns, suggesting other factors are important, too. In this paper, I specify a structural oil-market model that links returns to convenience yield, inventory news, and revisions of expected production cost (growth ...
Bernanke: Fed will monitor energy's inflation pressure
Noteworthy: Gulf oil spill: Costs of well disaster still piling up
British Petroleum's Macondo well blew out April 20 as the Deepwater Horizon platform sunk. By the time the well was capped on July 15, an estimated 4.9 million barrels of oil had flowed into the Gulf of Mexico. The U.S. government and BP are still assembling a definitive estimate of the flow; the final figure is likely to be a source of contention because it will be the basis for determining financial penalties.
Molding a new industry
Recent oil pressures have threatened the recovery of the district's plastics industry, but firms can cope by adapting
When will the world?s production of oil peak, and what will the economic consequences be? Calculating when turns out not to be so straightforward as it seems, but predicting the likely economic consequences is?and they?re not as bleak as many fear.
How to save gas
Pricing mechanisms, not fuel-economy standards, offer the best hope for reducing motor fuel consumption