## Measuring Oil-Price Shocks Using Market-Based Information

_IMF Working Papers, January 1, 2012_

## Source details

**Canonical URL:** [Measuring Oil-Price Shocks Using Market-Based Information](https://www.imf.org/en/publications/wp/issues/2016/12/31/measuring-oil-price-shocks-using-market-based-information-25658)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/measuring-oil-price-shocks-using-market-based-information-25658/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/measuring-oil-price-shocks-using-market-based-information-25658/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/measuring-oil-price-shocks-using-market-based-information-25658/bundle-manifest.json)

## Bibliographic details
- Authors: Tao Wu, Michele Cavallo
- Published: January 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463931810.001

---

### Summary and main findings
- We study the effects of oil-price shocks on the U.S. economy combining narrative and quantitative approaches.
- After examining daily oil-related events since 1984, we classify them into various event types.
- We then develop measures of exogenous shocks that avoid endogeneity and predictability concerns.
- Estimation results indicate that oil-price shocks have had substantial and statistically significant effects during the last 25 years.
- In contrast, traditional VAR approaches imply much weaker and insignificant effects for the same period.
- This discrepancy stems from the inability of VARs to separate exogenous oil-supply shocks from endogenous oil-price fluctuations driven by changes in oil demand.

### Methodology
- Examination of daily oil-related events since 1984 and classification into event types.
- Development of measures of exogenous shocks designed to avoid endogeneity and predictability concerns.
- Comparison of narrative/market-based shock measures with traditional VAR approaches.

### Subjects and keywords
- Subjects: Commodities, Consumer price indexes, Inflation, Oil, Oil prices, Oil production, Prices, Production
- Keywords: Consumer price indexes, exogenous oil-price shock, Global, Inflation, Market-Based Information, Middle East, Oil, oil price movement, oil price shock, Oil prices, Oil production, Oil Shocks, oil-price channel, oil-price forecasting equation, oil-price forecasting model, oil-price increase, oil-price indicator, oil-price movement, oil-price shock, price decline, price level, shock measure, VAR Identification, WP

*IMF Working Paper by Tao Wu and Michele Cavallo, "Measuring Oil-Price Shocks Using Market-Based Information", January 1, 2012.*

---

## Content in this bundle

- **_wp1219**
  - [_wp1219 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1219.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp1219 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1219.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/measuring-oil-price-shocks-using-market-based-information-25658_