Inelastic demand and supply explain oil volatility: Bank of Canada paper


The high levels of oil price volatility and decline in oil production volatility experienced in the past three decades is due to a substantial decline in the price elasticity of oil supply and demand, according to a Bank of Canada paper published on Tuesday.

Christiane Baumeister and Gert Peersman, the paper's authors, estimate a time-varying vector auto-regression model from 1974 to 2010 to examine why the increase in oil price volatility since the mid-1980s has been accompanied by a

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