A Structural Analysis of Oil Price Shocks on the Jamaican Macroeconomy

This paper utilizes structural vector autoregression models to examine the impact of oil price shocks on key Jamaican macroeconomic variables over the period 1997:01-2012:06. The results indicate that oil price shocks largely do not have a permanent effect on the Jamaican economy. Furthermore, the findings suggest that an oil shock emanating from an increase in global aggregate demand generally precedes an improvement in the domestic economy while demand shocks associated with precautionary holdings of oil (oil-specific demand shocks) and oil supply shocks generally result in a deterioration in domestic macroeconomic variables.