Theoretical Model

My biggest problem was developing my theoretical model. I chose the theory of supply to understand the effect price has on my macro aggregate variables. I looked at just the demand side to see how price influences the demand of oil and the impact it has on macro variables. Greenlaw brought up an excellent point in my presentation, I should have considered the supply side of the theory. In history, not only has demand shocks caused prices to fluctuate(price shock) but supply shocks too. Considering this, I would get a better understanding of how price shocks, no matter the cause, would affect my macro variables.


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One Response to Theoretical Model

  1. pmuthaa says:

    I agree, the theoretical model and interpreting the results section were by far the hardest for me to grasp. My theoretical model involved several variables such as capital and labour that I was not measuring in my research which just threw me off. For your research I agree the supply side will be largely impacted too. You’ve probably exhausted your article search but just in case here’s an article on that topic I thought was interesting (from just reading the abstract)

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