『Abstract
The recent fluctuations in the oil prices have intensified the
discussion on the dynamics and causes of real oil price changes.
While the long-run component of real oil price changes to have
a stochastic trend, global real economic activity has been thought
to generate important changes in real oil prices. Based on this
argument, in this paper, we analyze the real oil prices within
a trend-cycle decomposition framework, where we impose a stochastic
trend and assume the cyclical term to be affected by global economic
conditions. We also let the parameters vary over time to see whether
shocks to trend and the cycle have changing effects on the real
oil prices. As a result, we find that shocks to trend are more
persistent recently. In that sense, this paper contributes to
the literature by offering an explanation for the increased volatility
in oil prices. In addition, we show that global economic activity
contributed also to the previous oil price shocks, which were
regarded mainly as supply-side driven.
Keywords: Oil prices; Trend and cycle decomposition; Extended
Kalman filter』
1. Introduction
2. The model
2.1. Estimation methodology
3. Estimation results
3.1. The data and the initial conditions
3.2. Results
3.3. Comparing actual and predicted values
3.4. Policy implications
4. Conclusion
References