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An Analysis of the Global Oil Market Using SVARMA Models

Citation

Raghavan, M, An Analysis of the Global Oil Market Using SVARMA Models, Energy Economics ISSN 0140-9883 (2019) [Refereed Article]

Copyright Statement

2019 Elsevier B.V. All rights reserved.

DOI: doi:10.2139/ssrn.3355030

Abstract

The paper analyses the importance of supply versus demand shocks on the global oil market from 1974 to 2017, using a parsimonious structural vector autoregressive moving average (SVARMA) model. The superior out-of-sample forecasting performance of the reduced form VARMA compared to VAR alternatives advocates the suitability of this framework. We specifically account for the changes in the oil market over three distinctive sub-periods - pre moderation, great moderation and post moderation periods, to provide a means of identifying the changing nature of shock transmission mechanism across times. The findings shed some light on the effects of supply versus demand related oil shocks under different economic environment. Oil supply shocks explain large fraction of the movements in the global oil market in the pre and post moderation periods, i.e. during the slower economic growth periods. The importance of global activity shock on oil price movements is obvious during the 2003-2008 boom period. The oil specific shock has an interesting transmission path on the global economic activity, where the global activity responded positively and negatively during the global economic expansion and contraction respectively, emphasising the precautionary nature of the shock.

Item Details

Item Type:Refereed Article
Keywords:VARMA models, oil price shocks, global oil market, forecasting
Research Division:Economics
Research Group:Applied economics
Research Field:Environment and resource economics
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Economic growth
UTAS Author:Raghavan, M (Dr Mala Raghavan)
ID Code:136570
Year Published:2019
Deposited By:Economics and Finance
Deposited On:2020-01-08
Last Modified:2020-04-20
Downloads:0

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