Funded by: Fondazione Eni Enrico Mattei
January 2021 / December 2021

Oil Market Econometrics

The aim of this project is to investigate the reactions of the economies of specific countries (e.g. oil net exporters) to oil shocks. This project contributes to the vast literature on this topic by considering the potential nonlinerities and asymmetries in the reactions to oil shocks, in particular with respect the sign, the size and the source of the shocks, as well as the regime characterizing the economy under scrutiny at the time of the shock. The methodological approach involves the use of a Threshold SVAR (TSVAR), where the threshold variable is the level of economic activity. Our preliminary results on the main oil net exporting countries show that the impulse reponse functions do significantly depend on the type of the shock and the economic regime. On the contrary, there is not empirical evidence suggesting the relevance of the shock sign. This project will be extended in two directions: the first is methodological, that is an attempt to extend the TSVAR to a panel context and the comparison of the TSVAR with time-varying parameters model, such as the TVSVAR, the second is to include a larger number of countries in the analysis.

Main Results and Outputs

Modelling the global oil market; identification of oil shocks, distinguishing between demand, supply and “forward-looking” shocks; quantification of the oil shock on the major economic variables of single countries, using modern time-series econometrics.

Project team
Project leader
Matteo Manera
Econometrics of the Energy Transition - EET Programme Director Read more

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