In this paper, we examine the relationship among real oil prices, global economic activity, real value of the US dollar, and real interest rates during the period 1988:1 to 2011:12. We employ the Gregory and Hansen (1996) cointegration test with structural breaks to investigate the long-run...

We extend Kilian's (2009) framework to identify an exogenous shock arising from changes in financial market conditions and examine the consequent macroeconomic impacts of oil price changes. We find that a financial shock is a key determinant of oil prices and its macroeconomic impact is as...