Discussion Paper Details

Please find the details for DP14047 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Facts and Fiction in Oil Market Modeling

Author(s): Lutz Kilian

Publication Date: October 2019

Keyword(s): Bayesian inference, global real activity, IV estimation, Oil demand elasticity, oil price, oil supply elasticity and structural VAR

Programme Area(s): International Macroeconomics and Finance

Abstract: Baumeister and Hamilton (2019a) assert that every critique of their work on oil markets by Kilian and Zhou (2019a) is without merit. In addition, they make the case that key aspects of the economic and econometric analysis in the widely used oil market model of Kilian and Murphy (2014) and its precursors are incorrect. Their critiques are also directed at other researchers who have worked in this area and, more generally, extend to research using structural VAR models outside of energy economics. The purpose of this paper is to help the reader understand what the real issues are in this debate. The focus is not only on correcting important misunderstandings in the recent literature, but on the substantive and methodological insights generated by this exchange, which are of broader interest to applied researchers.

For full details and related downloads, please visit:

Bibliographic Reference

Kilian, L. 2019. 'Facts and Fiction in Oil Market Modeling '. London, Centre for Economic Policy Research.