Oil Prices and Expectations: A Quantile Structural VAR Approach

Abstract

Using a quantile structural vector autoregressive (QSVAR) approach, this study examines oil price reactions to consumer and business expectations. Unlike mean-based structural VARs, QSVAR analyses the full response distribution after an expectational shock. Findings indicate that the impact of expectation innovations on oil prices varies by quantile and agent. Positive business expectations increase oil prices via commodity demand, while consumer optimism mainly affects low oil prices. These insights aid policymakers in grasping how different agent expectations shape oil price distribution.