TY  - UNPD
A1  - Kilian, Lutz
T1  - Understanding the estimation of oil demand and oil supply elasticities
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 649
N2  - This paper examines the advantages and drawbacks of alternative methods of estimating oil supply and oil demand elasticities and of incorporating this information into structural VAR models. I not only summarize the state of the literature, but also draw attention to a number of econometric problems that have been overlooked in this literature. Once these problems are recognized, seemingly conflicting conclusions in the recent literature can be resolved. My analysis reaffirms the conclusion that the one-month oil supply elasticity is close to zero, which implies that oil demand shocks are the dominant driver of the real price of oil. The focus of this paper is not only on correcting some misunderstandings in the recent literature, but on the substantive and methodological insights generated by this exchange, which are of broader interest to applied researchers.
T3  - CFS working paper series - 649 
KW  - oil supply elasticity
KW  - oil demand elasticity
KW  - IV estimation
KW  - structural VAR
KW  - Bayesian inference
KW  - oil price
KW  - gasoline price
Y1  - 2020
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/57387
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-573874
UR  - https://ssrn.com/abstract=3759333
IS  - August 29, 2020
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -