Norges Bank

Working Paper

Oil price shocks and monetary policy in a data-rich environment

Author:
Knut Are Aastveit
Series:
Working Paper
Number:
10/2013

Abstract
This paper examines the impact of different types of oil price shocks on the U.S. economy, using a factor-augmented VAR (FAVAR) approach. The results indicate that when examining the effects of oil price shocks, it is important to account for the interaction between the oil market and the macroeconomy. I find that oil demand shocks are more important than oil supply shocks in driving several macroeconomic variables, and that the origin of demand shocks matter. Specifically, the U.S. economy and monetary policy respond differently to global demand shocks that have the effect of raising the price of oil and to oil-specific demand shocks.

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ISSN 1502-8190 (online)

Published 4 April 2013 09:30
Published 4 April 2013 09:30