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Browsing by Subject "raakaöljy"

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  • Piiroinen, Janne (2022)
    Crude oil is a critical resource which is refined and used extensively by economies for transportation, food and energy production, chemical and plastics industries, and heating. As a result, changes in the real price of oil can significantly impact the macroeconomy. This thesis contributes to the extensive oil-market literature by investigating how the supply and demand disturbances in the global oil market affect the Finnish macroeconomy, namely its industrial production, consumer prices and employment. The effects of the oil price shocks are estimated using linear structural vector autoregressive modelling and seasonally adjusted monthly data from 1989:1 to 2019:12. This method allows identifying the effects of the oil market disturbances despite reverse causality from macro variables back to the oil prices. As the real oil prices are determined in the markets by supply and demand, the unexpected changes in oil prices are first decomposed into three components: Oil supply shocks are changes in the real oil price driven by changes in crude oil production. Aggregate demand shocks are the changes in the real oil price driven by real global economic activity. Oil-specific demand shocks include the remaining changes in the real oil price, which are not driven by either supply or demand. The empirical results of the thesis demonstrate how the effects of oil price shocks vary depending on the origins of the price change. These effects are also more persistent for industrial production and employment than consumer prices. The effects of positive oil price shocks are generally found adverse for the Finnish macroeconomy, but with two exceptions. Positive aggregate demand shock or oil-specific demand shock increases industrial production in Finland in the short term. It is possible that some industry sectors, for example, oil refinement, benefit from the rising oil prices, increasing production and employment in Finland. However, investigating further requires industry sector-level data. This thesis also lends support to a previous study: The consumer prices rise rapidly after a positive oil-specific demand shock, which is explicitly the most important oil price shock in defining Finnish consumer prices.