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The Response of US Macroeconomic Aggregates to Price Shocks in Crude Oil vs. Natural Gas

Graduate School of Economics, Kobe University 2-1, Rokkodai, Nada-Ku, Kobe 657-8501, Japan
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Energies 2020, 13(10), 2603; https://doi.org/10.3390/en13102603
Received: 29 March 2020 / Revised: 8 May 2020 / Accepted: 15 May 2020 / Published: 20 May 2020
(This article belongs to the Special Issue Empirical Analysis of Natural Gas Markets)
Price fluctuations in crude oil and natural gas, as important sources of energy, have a remarkable influence on our economies and daily lives. Therefore, it is extremely important to react appropriately and to formulate appropriate policies or strategies to reduce the expected negative effects of fluctuations. However, as Kilian suggested, not all oil price shocks are similar; price increases can have diverse impacts on the real price of oil, depending on the underlying determinants of the price fluctuation. Therefore, economists, policymakers, and investors need to decompose real price shocks and evaluate the responses of macroeconomic aggregates to different types of shocks. In this study, we investigate and compare the different effects crude oil and natural gas price shocks have on US real GDP and CPI levels, utilizing a two-stage method based on a structural vector autoregression (SVAR) model proposed by Kilian. We found that a crude oil specific demand shock made larger contributions to the real price of oil than a natural gas specific demand shock did to the real price of gas, and that specific demand shocks in crude oil and natural gas markets had different effects on US CPI inflation and had similar effects on the real US GDP level. View Full-Text
Keywords: SVAR; oil price; gas price; US macroeconomic aggregates; GDP; CPI SVAR; oil price; gas price; US macroeconomic aggregates; GDP; CPI
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MDPI and ACS Style

Shang, J.; Hamori, S. The Response of US Macroeconomic Aggregates to Price Shocks in Crude Oil vs. Natural Gas. Energies 2020, 13, 2603.

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