A1160
Title: Disentangling oil market shocks using a proxy-FSVAR approach
Authors: Linus Nuesing - University of Konstanz (Germany) [presenting]
Abstract: The purpose is to analyze the effect of the oil market on the U.S. economy through two different channels: the flow and the expectation channel. In particular, oil market shocks are divided into an oil flow supply and demand shock, as well as a supply and demand news shock. Furthermore, the interaction of these shocks with the macroeconomic and financial markets is examined. In order to identify the four oil price shocks, the Factor-SVAR approach is employed, and it is extended by a proxy equation that allows the identification of the two news shocks by external instruments. The factor structure in the residuals enables modelling of data containing different proxies for the same economic concept and the inclusion of variables that encompass measurement errors in their construction.
