The Texas Public Policy Foundation’s mission “is to promote and defend liberty, personal responsibility, and free enterprise in Texas and the nation by educating and affecting policymakers and the Texas public policy debate with academically sound research and outreach.” This research is conducted on a number of different topics and is presented to a wide range of audiences.
Recently, I presented research at the Missouri Valley Economic Association’s (MVEA) fiftieth annual meeting in Kansas City, Missouri. The MVEA “was founded in 1963 to encourage the development of economics as a theoretical as well as applied discipline, to foster communication among scholars in those fields, and to facilitate the extension and the dissemination of knowledge thereof.” The meetings provide a friendly, academic setting to present research, get feedback, and discuss policy-related issues.
This year’s annual meeting had a record attendance with approximately 280 registrants and over 200 presenters during 64 sessions. These sessions included presentations of top-notch research related to fiscal policy, energy economics, regional economics, transportation, and other important areas. There were discussions regarding the state of the economy, where most supported continued tepid national growth, and a host of different policy-related opinions from free market to government-oriented solutions.
The working paper I presented is titled “Macroeconomic Responses to an Oil Price Shock: A Long-Run Structural Approach.” (Please contact me if you would like a copy.)
Here is the abstract: “This paper studies the responses of U.S. macro aggregates to an oil price shock by considering a less controversial long-run structural approach. I consider a four-variable VAR model that includes monthly data for the unemployment rate, real oil price, Chicago Fed national activity index, and the inflation rate of the consumer price index over the 1968:1-2012:8 period. I construct a structural VAR representation with fully recursive long-run restrictions to identify structural shocks. After finding a possible structural break in the real oil price series around 1986, I split the sample period and estimate the responses to an oil price shock in each sub-sample; these responses provide suggestive evidence of diminished economic effects in the latter period. Since oil demand-related disturbances appear to dominate oil price fluctuations over my sample period, I extend model by replacing the real oil price with Kilian’s (2009a) global real economic activity index and impose long-run restrictions that attempt to extract a global oil demand shock. For the full sample, the results indicate oil price and global oil demand shocks provide similar expansionary responses; however, inflation’s responses to the two oil-related shocks differ. Thus, this research suggests that monetary policymakers may not only concern themselves with the price of oil, but also how their policies influence or react to underlying sources of an oil price shock.”
Bottom line: Economic responses to an oil price shock are dependent on the causes (i.e. oil supply or demand) of this shock and policymakers should be aware of their indirect effects on the relationship between the oil price and economy.
The research presented at the MVEA meeting and others like it provide important glimpses into economic problems and solutions. As we at the Foundation continue to reach for answers to important policy questions, it is important for us to present sound research at these types of meetings and discover new ideas in the process.