How do oil supply and carbon policy affect firms’ expectations and decisions?

We make use of new methodological advances in quantifying oil supply and monetary policy shocks that are exogenous with respect to macroeconomic conditions to examine the response of state economies to these shocks. Our approach is parsimonious and straightforward: once exogenous oil supply shocks and monetary policy shocks have been identified, the dynamic response of state economies to exogenous shocks can be analyzed directly using ordinary least squares (OLS) and other conventional methods of inference. The fact that no identifying assumptions are required makes our findings invariant to different identification schemes. Results indicate that an exogenous monetary policy shock typically causes a decrease in real personal income. The paper also documents a fair degree of similarity in the response of real personal income to exogenous oil supply across many states. Like the aggregate response, following an exogenous oil supply shock, real personal income decreases in many states.

Inflation in the euro area has been falling steadily since early 2013 and at the end of 2014 turned negative. Part of the decline has been due to oil prices, but the weakness of aggregate demand has also played a significant role. This paper uses a VAR model to quantify the contribution of oil supply, aggregate demand and monetary policy shocks (identified by means of sign restrictions) on inflation in the euro area. The analysis suggests that in the last two years inflation has been driven down by all three factors, as the effective lower bound to policy rates has prevented the European Central Bank from reducing the short-term rates to support economic activity and align inflation with the definition of price stability. Remarkably, the joint contribution of monetary and demand shocks is at least as important as that of oil price developments to the deviation of inflation from its baseline. Country-by-country analysis shows that both aggregate demand and oil supply shocks have driven inflation down everywhere, albeit with varying intensity. The findings stand confirmed after a series of robustness checks.

Inflation in the euro area has been falling since mid-2013, turned negative at the end of 2014 and remained below target thereafter. This paper employs a Bayesian VAR to quantify the contribution of a set of structural shocks, identified by means of sign restrictions, to inflation and economic activity. Shocks to oil supply do not tell the full story about the disinflation that started in 2013, as both aggregate demand and monetary policy shocks also played an important role. The lower bound to policy rates turned the European Central Bank (ECB) conventional monetary policy de facto contractionary. A country analysis confirms that the negative effects of oil supply and monetary policy shocks on inflation was widespread, albeit with different intensity across countries. The ECB unconventional measures since 2014 contributed to raising inflation and economic activity in all the countries. All in all, our analysis confirms the appropriateness of the ECB asset purchase programme. JEL Classification: C32, E31, E32, E52

Oil price shocks, economic policy uncertainty and China’s trade: A quantitative structural analysis

Inflation in the euro area has been falling since mid-2013, turned negative at the end of 2014 and remained below target thereafter. This paper employs a Bayesian VAR to quantify the contribution of a set of structural shocks, identified by means of sign restrictions, to inflation and economic activity. Shocks to oil supply do not tell the full story about the disinflation that started in 2013, as both aggregate demand and monetary policy shocks also played an important role. The lower bound to policy rates turned the European Central Bank (ECB) conventional monetary policy de facto contractionary. A country analysis confirms that the negative effects of oil supply and monetary policy shocks on inflation was widespread, albeit with different intensity across countries. The ECB unconventional measures since 2014 contributed to raising inflation and economic activity in all the countries. All in all, our analysis confirms the appropriateness of the ECB asset purchase programme.

This study investigated the sources of economic fluctuation in the Indian economy. To assess this objective, time-based and frequency-based filters are applied to extract the business cycle from the Gross Domestic Product. Further, a causal link between the business cycle and its different sources was explored using Markov’s regime-switching regression. The results indicated that total factor productivity, oil supply, and monetary policy increased business cycle volatility. Furthermore, although the fiscal policy remained unaffected, trade increased economic fluctuations during the pro-market regime. The findings suggested that the views of the real business cycle and monetarist schools of thought hold true for economic fluctuation in India, as opposed to the Keynesian view.

This paper investigates the effects of global geopolitical risks and global supply chain pressures on global inflation for the monthly period of 1999M1–2022M12. The investigation is based on a structural vector autoregression model, where the effects of global oil prices and global monetary policy are controlled for. Four alternative measures of inflation are used, including headline, core, food, and energy inflation. The empirical results show that disruptions in global supply chains are the main drivers of global inflation in the long run as the corresponding shocks explain the lion's share of volatilities in headline inflation (by 32%), core inflation (by 30%), and food inflation (by 22%), followed by oil price shocks and policy rate shocks. In comparison, energy inflation is explained the most by oil price shocks (by 55%) followed by supply chain shocks and policy rate shocks. Positive supply chain pressure and oil price shocks have positive and statistically significant effects on headline inflation even after five years, whereas positive policy rate shocks have negative and statistically significant effects on headline inflation in the long run. In contrast, positive shocks to geopolitical risk result in higher headline inflation only up to one year, with insignificant effects in the long run. Several policy implications follow.

Effective supply-chain risk assessment is the basis for developing sustainable supply policies, and it has received growing attention in global oil supply system management. Dynamical modeling and data-driven modeling are two main risk assessment technologies that have been applied in crude oil supply networks. Dynamical risk modeling and data-driven risk modeling offer distinct advantages in capturing the complexities and dynamics of the system. Considering their complementary strengths, a hybrid modeling framework combining system dynamics and data-driven neural networks is proposed for risk assessment of crude oil transportation network. Specifically, the system dynamics module is to capture and interpret the underlying dynamics and mechanisms of the transportation network, while the deep neural networks module is to discover the nonlinear patterns and dependencies of risk factors from various inputs. Based on joint training, the hybrid model can ultimately develop the capability of risk prediction with a small amount of data. In addition, it can consider the dynamic nature of crude oil transportation networks to interpret the predicted results of the risk level for decision-makers to make specific risk-mitigating policies. Extensive experiments based on China’s scenario have been conducted to demonstrate the effectiveness of the proposed hybrid model, and the results show that our model achieves higher accuracy in risk prediction compared to the current state of the art. The results also present an explanation for China’s policy change of building a resilient crude oil transportation system.

Rethinking zero deforestation beyond 2020 to more equitably and effectively conserve tropical forests

This chapter details how Saudi Arabia and the United States gradually regained trust in each other through joint projects that utilized Saudi petrodollars. This system of petrodollar interdependence met immediate concerns of both parties, such as providing the Saudis with secure places to invest and appreciate their revenues while providing the United States with needed funds. More broadly, however, Riyadh and Washington sought to develop petrodollar interdependence between each other in the service of indirect goals, most prominently Saudi oil supply and price policies for the Americans and US action on Arab demands regarding Israel for the Saudis. Saudi–US petrodollar interdependence would take time to develop, and petrodollar ties did not guarantee a meeting of minds. But pursuing petrodollar interdependence went a long way in restoring Saudi Arabia to the system of US empire while radically transforming the former's role within the latter, as Saudi Arabia's importance shifted from providing the West with low-priced oil to supplying the United States with large sums of petrodollars that provided vital funds to the US economy.

We discuss combining sign restrictions with information in external instruments (proxy variables) to identify structural vector autoregressive (SVAR) models. In one setting, we assume the availability of valid external instruments. Sign restrictions may then be used to identify further orthogonal shocks, or as an additional piece of information to pin down the shocks identified by the external instruments more precisely. In a second setting, we assume that proxy variables are only “plausibly exogenous” and suggest various types of inequality restrictions to bound the relation between structural shocks and the external variable. This can be combined with conventional sign restrictions to further narrow down the set of admissible models. Within a proxy-augmented SVAR, we conduct Bayesian inference and discuss computation of Bayes factors. They can be useful to test either the sign- or IV restrictions as overidentifying. We illustrate the usefulness of our methodology in estimating the effects of oil supply and monetary policy shocks.

The differences that methods make: Cross-border power flows and accounting for carbon emissions from electricity use

At present, the global carbon dioxide concentration is approaching the threshold, and the climate problem is more prominent than ever, which seriously threatens people's daily life. The value of coal is constrained by many aspects, including coal mine cost, international coal transportation price, macroeconomic policies of the world, global coal price, coal mine inventory, and the rising price of alternative resources, etc. This article focuses on the supply and demand situation and policy measures of the world coal industry to study the main reasons affecting the supply and demand situation and price changes of the world coal industry, and put forward relevant suggestions, in order to provide some reference and significance for the development of coal industry. This article focuses on the supply and demand situation of the world coal industry and the policy measures, and puts forward relevant suggestions, with a view to providing certain reference and significance for the development of the coal industry.

How to achieve the goal of carbon peaking by the energy policy? A simulation using the DCGE model for the case of Shanghai, China

In Sweden, as in most other countries, energy policy implied energy supply policy until the early 1970s. The 1973 - 74 energy price increases and oil supply disturbances brought about a substantial change in the conditions for energy policy.