September 2016

Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications

Sylvain Leduc, Kevin Moran and Robert J. Vigfusson


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.


PDF: Full Paper

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Last Update: June 19, 2020