Abstract
We investigate the impact of supply and demand shocks in the global crude oil market on the CDX spread, in the context of a structural VAR model based on monthly data, over the period from November 2003 to October 2015. We find that the reaction of the CDX spread to changes in the real price of crude oil differs considerably depending on the sources of shocks. In the long run, crude oil supply shocks, aggregate demand shocks, and oil-specific demand shocks together account for nearly 90% of the variation of the CDX spread.
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Notes
Data source: Bank for International Settlements (BIS), http://www.bis.org/statistics/derstats.htm.
Source: U.S. EIA Beta website, http://www.eia.gov/beta/international/.
See more discussion on the construction of this index in Kilian and Park (2009).
See more discussion on the precautionary demand for crude oil in Alquist and Kilian (2010).
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Dai, W., Serletis, A. Oil Price Shocks and the Credit Default Swap Market. Open Econ Rev 29, 283–293 (2018). https://doi.org/10.1007/s11079-017-9454-z
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DOI: https://doi.org/10.1007/s11079-017-9454-z