Simulations from a standard two-region model where producers respond to changes in interest rates are better able to match observed data than an identical model without supply-side responses. This indicates that incorporating the supply-side behaviour of oil producers is quantitatively important...

We demonstrate that the constant variance assumption in the Markov-switching Augmented Dickey-Fuller (ADF) test proposed by Hall, Psaradakis and Sola (1999) may result in the misjudgement of bubbles. Upon relaxing this assumption to allow for regime-varying error variances in the...