On the Sources of Oil Price Fluctuations

ByDeren Unalmis, Ibrahim Unalmis, Filiz D Unsal

December 1, 2009

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Analyzing macroeconomic impacts of oil price changes requires first to investigate different sources of these changes and their distinct effects. Kilian (2009) analyzes the effects of an oil supply shock, an aggregate demand shock, and a precautionary oil demand shock. The paper's aim is to model macroeconomic consequences of these shocks within a new Keynesian DSGE framework. It models a small open economy and the rest of the world together to discover both accompanying effects of oil price changes and their international transmission mechanisms. Our results indicate that different sources of oil price fluctuations bring remarkably diverse outcomes for both economies.

Subject: Inflation, Labor productivity, Oil, Oil prices, Public enterprises

Keywords: equilibrium mark-up, government spending shock, oil price inflation, oil price shock, price of oil, price volatility, WP

Pages:
28
Volume:
2009
DOI:
https://doi.org/10.5089/9781451874303.001
Issue:
285
Series:
Working Paper No. 2009/285
Stock No:
WPIEA2009285
ISBN:
9781451874303
ISSN:
1018-5941

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