Transitory and Permanent Shocks in the Global Market for Crude Oil
IMF Working Papers, February 28, 2020
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- Transitory and Permanent Shocks in the Global Market for Crude Oil
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Bibliographic details
- Authors: Nooman Rebei, Rashid Sbia
- Published: February 28, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513528601.001
Overview and Objective
- Paper documents the determinants of real oil price in the global market using an SVAR model embedding transitory and permanent shocks on oil demand and supply as well as speculative disturbances.
- Authors: Nooman Rebei, Rashid Sbia
- Date: February 28, 2020
Key Findings
- There are significant differences in the propagation mechanisms of transitory versus permanent shocks, underscoring the importance of disentangling their distinct effects.
- Permanent supply disruptions are a bigger factor in historical oil price movements during the most recent decades.
- Speculative shocks became less influential over the same period.
Methodology and Analytical Tools
- Structural Vector Autoregression (SVAR) model that embeds:
- Transitory shocks on demand and supply
- Permanent shocks on demand and supply
- Speculative disturbances
- Estimation and inference techniques mentioned in keywords: Bayesian estimation, Kalman filtering, window estimation result, Vector autoregressions, Narrative analysis.
Policy-Relevant Implications (inferred from findings)
- Distinguishing transitory from permanent shocks is crucial for policy responses to oil price movements.
- Policies and market monitoring should prioritize detection and mitigation of permanent supply disruptions, given their increased historical importance.
- The declining role of speculative shocks suggests policy focus may shift away from speculative concerns toward structural supply vulnerabilities.
Subject Areas and Keywords
- Subjects: Commodities, Commodity price fluctuations, Economic theory, Oil, Oil prices, Oil production, Prices, Production, Supply shocks
- Keywords: Bayesian estimation, Commodity price fluctuations, demand shocks transmission, Global, Kalman filtering, medium term, Narrative analysis, Oil, Oil market, oil price, oil price dynamics, oil price plunge, oil price volatility, Oil prices, Oil production, oil supply shock, oil-supply shocks, price decline, price upswing, standard deviation, supply and demand demand shock, Supply shocks, Vector autoregressions, window estimation result, WP
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- Working Paper