Modeling the Response of Gasoline-Crude Oil Price Crack Spread Macroeconomic Shocks

Bradley T. Ewing, Mark Andrew Thompson

Research output: Contribution to journalArticle

Abstract

To date, considerable attention has been given to evaluating movements in crude oil and gasoline prices and in determining the significance of fundamental state variables that may influence these prices. This paper differs from the existing literature by identifying the response of the single-product gasoline-crude oil crack spread to unexpected changes in real output growth, inflation, the corporate default risk premium, and the stance of monetary policy utilizing the econometric techniques of vector autoregression and generalized impulse response analysis. The generalized impulse response method does not impose a priori restrictions as to the relative importance each of the state variables may play in the process of transmitting unexpected information from the macroeconomic variables to the crack spread. The results show the extent and the magnitude of the relationship between the crack spread being investigated and macroeconomic factors.

Original languageEnglish (US)
Pages (from-to)203-213
Number of pages11
JournalAtlantic Economic Journal
Volume46
Issue number2
DOIs
StatePublished - Jun 1 2018

Fingerprint

Crude oil price
Modeling
Macroeconomic shocks
State variable
Generalized impulse responses
Inflation
Vector autoregression
Impulse response analysis
Econometrics
Risk premium
Real output
Default risk
Monetary policy
Crude oil
Macroeconomic variables
Gasoline prices
Output growth
Relative importance
Macroeconomic factors

Keywords

  • C32
  • Crack spread
  • Crude oil price
  • Gasoline price
  • Impulse response
  • Macroeconomic factors
  • Q43
  • Vector autoregression

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Modeling the Response of Gasoline-Crude Oil Price Crack Spread Macroeconomic Shocks. / Ewing, Bradley T.; Thompson, Mark Andrew.

In: Atlantic Economic Journal, Vol. 46, No. 2, 01.06.2018, p. 203-213.

Research output: Contribution to journalArticle

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