Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications

Leduc, Sylvain; Moran, Kevin; Vigfusson, Robert J.

doi:10.17016/IFDP.2016.1179

Working Paper

Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications

Abstract: We show that a model where investors learn about the persistence of oil-price movements accounts well for the fluctuations in oil-price futures since the late 1990s. Using a DSGE model, we then show that this learning process alters the impact of oil shocks, making it time-dependent and consistent with the muted impact oil-price changes had on macroeconomic outcomes during the early 2000s and again over the past two years. The Spring 2008 increase in oil prices had a larger impact because market participants considered that it was likely driven by permanent shocks.

Keywords: Kalman filter; Time-variation; Inventories; Conditional response;

JEL Classification: E32; E37; Q43;

https://doi.org/10.17016/IFDP.2016.1179