02065cas a2200253 a 4500 AALejournalIMF014859 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498333481 1018-5941 BD-DhAAL BD-DhAAL Beidas-Strom, Samya. Oil Price Volatility and the Role of Speculation / Samya Beidas-Strom, Andrea Pescatori. Washington, D.C. : International Monetary Fund, 2014. 1 online resource (34 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students How much does speculation contribute to oil price volatility? We revisit this contentious question by estimating a sign-restricted structural vector autoregression (SVAR). First, using a simple storage model, we show that revisions to expectations regarding oil market fundamentals and the effect of mispricing in oil derivative markets can be observationally equivalent in a SVAR model of the world oil market a la Kilian and Murphy (2013), since both imply a positive co-movement of oil prices and inventories. Second, we impose additional restrictions on the set of admissible models embodying the assumption that the impact from noise trading shocks in oil derivative markets is temporary. Our additional restrictions effectively put a bound on the contribution of speculation to short-term oil price volatility (lying between 3 and 22 percent). This estimated short-run impact is smaller than that of flow demand shocks but possibly larger than that of flow supply shocks. Mode of access: Internet Pescatori, Andrea. IMF Working Papers; Working Paper ; No. 2014/218 Full text available on IMF http://elibrary.imf.org/view/journals/001/2014/218/001.2014.issue-218-en.xml IMF e-Library