Search Results
A New View of the Relationship Between Oil Prices, Gasoline Prices and Inflation Expectations
Kilian, Lutz; Zhou, Xiaoqing
(2020-09-22)
It has been considered self-evident until recently that oil prices drive inflation expectations, but new evidence calls into question this conclusion.
Dallas Fed Economics
Working Paper
The Econometrics of Oil Market VAR Models
Zhou, Xiaoqing; Kilian, Lutz
(2020-03-06)
Oil market VAR models have become the standard tool for understanding the evolution of the real price of oil and its impact in the macro economy. As this literature has expanded at a rapid pace, it has become increasingly difficult for mainstream economists to understand the differences between alternative oil market models, let alone the basis for the sometimes divergent conclusions reached in the literature. The purpose of this survey is to provide a guide to this literature. Our focus is on the econometric foundations of the analysis of oil market models with special attention to the ...
Working Papers
, Paper 2006
Working Paper
Macroeconomic Responses to Uncertainty Shocks: The Perils of Recursive Orderings
Kilian, Lutz; Plante, Michael D.; Richter, Alexander W.
(2022-11-23)
A common practice in empirical macroeconomics is to examine alternative recursive orderings of the variables in structural vector autoregressive (VAR) models. When the implied impulse responses look similar, the estimates are considered trustworthy. When they do not, the estimates are used to bound the true response without directly addressing the identification challenge. A leading example of this practice is the literature on the effects of uncertainty shocks on economic activity. We prove by counterexample that this practice is invalid in general, whether the data generating process is a ...
Working Papers
, Paper 2223
Working Paper
Nonlinearities in the oil price-output relationship
Kilian, Lutz; Vigfusson, Robert J.
(2011)
It is customary to suggest that the asymmetry in the transmission of oil price shocks to real output is well established. Much of the empirical work cited as being in support of asymmetries, however, has not directly tested the hypothesis of an asymmetric transmission of oil price innovations. Moreover, many of the papers quantifying these asymmetric responses are based on censored oil price VAR models which recently have been shown to be invalid. Other studies are based on dynamic correlations in the data that do not shed light on the central question of whether the structural responses of ...
International Finance Discussion Papers
, Paper 1013
Geopolitical oil price risk not a major driver of global macroeconomic fluctuations
Kilian, Lutz; Plante, Michael D.; Richter, Alexander W.
(2025-02-18)
Notwithstanding the attention geopolitical events in oil markets have attracted, we find that geopolitical oil price risk is unlikely to generate sizable recessionary effects.
Dallas Fed Economics
What Can Be Learned from the Persistent Electric Power Outages in Texas?
Kilian, Lutz
(2021-04-01)
Texas suffered massive power outages during unusually cold temperatures in February. Millions of households lost access not only to power but also to heat and water for days—a situation that was foreseeable and could have been avoided.
Dallas Fed Economics
Working Paper
When Do State-Dependent Local Projections Work?
Kilian, Lutz; Pesavento, Elena; Herrera, Ana María; Goncalves, Silvia
(2022-05-06)
Many empirical studies estimate impulse response functions that depend on the state of the economy. Most of these studies rely on a variant of the local projection (LP) approach to estimate the state-dependent impulse response functions. Despite its widespread application, the asymptotic validity of the LP approach to estimating state-dependent impulse responses has not been established to date. We formally derive this result for a structural state-dependent vector autoregressive process. The model only requires the structural shock of interest to be identified. A sufficient condition for the ...
Working Papers
, Paper 2205
Working Paper
Facts and Fiction in Oil Market Modeling
Kilian, Lutz
(2020-12-21)
A series of recent articles has called into question the validity of VAR models of the global market for crude oil. These studies seek to replace existing oil market models by structural VAR models of their own based on different data, different identifying assumptions, and a different econometric approach. Their main aim has been to revise the consensus in the literature that oil demand shocks are a more important determinant of oil price fluctuations than oil supply shocks. Substantial progress has been made in recent years in sorting out the pros and cons of the underlying econometric ...
Working Papers
, Paper 1907
Limited Impact of Rising Energy Prices on U.S. Inflation, Inflation Expectations in 2020–23
Kilian, Lutz; Zhou, Xiaoqing
(2021-11-23)
Predictions of $100 per barrel oil during the coming winter have raised fears of persistently high inflation and rising inflation expectations for years to come. However, quantitative analysis suggests that these concerns have been overstated.
Dallas Fed Economics
Working Paper
Forecasting the price of oil
Alquist, Ron; Kilian, Lutz; Vigfusson, Robert J.
(2011)
We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable based on macroeconomic aggregates? Does this predictability translate into gains in out-of-sample forecast accuracy compared with conventional no-change forecasts? How useful are oil futures markets in forecasting the price of oil? How useful are survey forecasts? How does one evaluate the sensitivity of a ...
International Finance Discussion Papers
, Paper 1022
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