Abstract

Does the production network structure matter for the transmission of oil shocks? Using a Bayesian time-varying VAR, the paper derives the impact of oil shocks on GDP for a set of OECD economies. It further estimates various measures to characterize the production network structure based on Input–Output matrices. When the relationship between the time-varying responses of GDP to oil demand and oil supply shocks and production network characteristics is analyzed, the paper finds that measures like skewness in the in-degrees and in the out-degrees or density tend to amplify the negative impact of oil shocks on GDP. The results here are in line with the recent literature that outlines the importance of network structures for aggregate dynamics.

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