40017 - EABCN Training School: Oil and the Macroeconomy

EABCN Training School: Oil and the Macroeconomy

By Lutz Kilian (University of Michigan and CEPR)

Venue: Teatro, Badia Fiesolona, European University Institute

Via dei Roccettini 9 - San Domenico di Fiesole, Firenze​ (Florence)


28-30 May 2018


Course materials and schedule

Syllabus, MATLAB requirements and Reading List

Local information (Florence)

Florence Map

List of participants


Course background

The price of crude oil is of immediate concern to policymakers, firms, and consumers. Unexpected large changes in the price of crude oil have the potential of wreaking havoc on the economy. Unexpected shifts in the price of oil and their effects on the economy are the subject of a large literature in economics. Such oil price shocks may arise for a range of reasons such as changes in the market power of oil producers, exogenous political events causing disruptions in oil production, technological innovation, shifts in consumer preferences, government intervention in the oil market, unanticipated changes in the global business cycle, or shifts in oil price expectations.

Oil price shocks are known to affect international trade and financial flows, exchange rates, investment and consumer spending, government revenue and spending, inflation, interest rates, real estate markets, consumer sentiment, and stock returns, among other macroeconomic aggregates. At the same time, oil prices respond to global macroeconomic conditions including global real economic activity, interest rates and exchange rates, making it difficult to separate the cause and effect of oil price shocks in practice.

This course covers the determination of the price of oil in global markets and its relationship with macroeconomy (inflation, economic growth, financial markets). Both empirical approaches and theoretical models will be discussed along with institutional background. The course will examine selected episodes such as the surges in the price of oil in the late 1970s and mid-2000s, the spikes in the price of oil in 1973/74 and 1990/91, as well as the oil price declines of 1986, 2008, and 2014-16. Special attention will be given the optimal monetary policy responses to oil price shocks, the possible role of asymmetries in the transmission of oil price shocks, and the implications of the shale oil revolution in the United States.


About the instructor

Lutz Kilian is Professor of Economics at the University of Michigan, a research fellow at the CEPR, the Center for Financial Studies, CESifo, the Price Institute, and the Euro Area Business Cycle Network, a member of the research council of J.P Morgan Center of Commodities, and an officer of CEBRA.  He received his Ph.D. in Economics from the University of Pennsylvania in 1996 and his M.A. in Development Banking from The American University in 1988. He joined the faculty at Michigan in 1996.

Prior to his Ph.D., he worked for the research department of the Inter-American Development Bank in Washington, DC. During 2001-03 he served as an adviser to the European Central Bank in Frankfurt/M., Germany. Professor Kilian has been a research visitor at the Federal Reserve Board, the European Central Bank, and the International Monetary Fund. He has also been a consultant for the International Monetary Fund, the Inter-American Development Bank, the World Trade Organization, the European Central Bank, the Bank of Canada, the European Parliament, and the U.S. Energy Information Administration, among others.

Professor Kilian has published over 90 articles and has been listed among the top 1% of most influential economists worldwide three years running by Thompson-Reuters. His work has appeared in leading general interest and field journals in economics and statistics. He is also the author of a recent textbook with Helmut Lütkepohl on Structural Vector Autoregressive Analysis (Cambridge University Press, 2017). His research interests include time series econometrics, empirical macroeconomics, and energy economics. He is one of the leading experts worldwide on oil markets.