In this paper, we decompose oil price changes into their component parts following Kilian (2009) and estimate the dynamic effects of each component on industry-level production and prices in the U.S. and Japan using identified VAR models. The way oil price changes affect each industry depends on...

If commercial producers or financial investors use futures contracts to hedge against commodity price risk, the arbitrageurs who take the other side of the contracts may receive compensation for their assumption of nondiversifiable risk in the form of positive expected returns from their...

What are the shocks that drive economic fluctuations? I examine technology and money shocks in some detail, and briefly review the evidence on oil price and credit shocks. I conclude that none of these popular candidates accounts for the bulk of economic fluctuations. I then examine whether...

Traditional approaches to structural vector autoregressions can be viewed as special cases of Bayesian inference arising from very strong prior beliefs. These methods can be generalized with a less restrictive formulation that incorporates uncertainty about the identifying assumptions...

Identifying assumptions need to be imposed on dynamic models before they can be used to analyze the dynamic effects of economically interesting shocks. Often, the assumptions are only rich enough to identify a set of solutions. This paper considers two types of restrictions on the structural...

The Green Paradox posits that fossil fuel markets respond to changing expectations about climate legislation, which limits future consumption, by shifting consumption to the present through lower present-day prices. We demonstrate that oil futures responded negatively to daily changes in the...

This paper investigates why, in October 1987, almost all stock markets fell together despite widely differing economic circumstances. The idea is that "contagion" between markets occurs as the result of attempts by rational agents to infer information from price changes in other markets. This...

This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S dollar nominal exchange rate. Despite state-of-the-art methodologies, we find little systematic relation between oil prices and the exchange rate at the monthly and quarterly...

I adapt the methods of Gurkaynak, Sack, and Swanson (2005) to estimate two dimensions of monetary policy during the 2009-2015 zero lower bound period in the U.S. I show that, after a suitable rotation, these two dimensions can be interpreted as "forward guidance" and "large-scale asset...

We combine annual stock market data for the most important equity markets of the last four centuries: the Netherlands/U.K. (1629-1812), U.K. (1813-1870) and U.S. (1871-2015). We show that dividend yields are stationary and consistently forecast returns. The documented predictability holds for...