Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications

49 Pages Posted: 13 Sep 2016

See all articles by Sylvain Leduc

Sylvain Leduc

Federal Reserve Banks - Federal Reserve Bank of San Francisco

Kevin Moran

Laval University - Department of Economics

Robert J. Vigfusson

Board of Governors of the Federal Reserve System

Date Written: 2016-09

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

Suggested Citation

Leduc, Sylvain and Moran, Kevin and Vigfusson, Robert John, Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications (2016-09). FRB International Finance Discussion Paper No. 1179, Available at SSRN: https://ssrn.com/abstract=2838120 or http://dx.doi.org/10.17016/IFDP.2016.1179

Sylvain Leduc (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Kevin Moran

Laval University - Department of Economics ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

Robert John Vigfusson

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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