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Coalbed methane is one of the most important and valuable natural resources in the Western United States. The natural gas that results from CBM development is the cleanest burning fossil fuel, and the extensive domestic supply makes it a central element of the national goal of a secure supply of energy. Demand for natural gas will continue to grow and CBM will play an increasingly larger role in meeting that demand. CBM production has expanded tremendously over the past decade, and the rapidity with which development has expanded has resulted in stresses and tension in affected communities. Development of this important energy resource must be balanced with a number of other important goals of protecting water,...
Models that treat innovations to the price of energy as predetermined with respect to U.S. macroeconomic aggregates are widely used in the literature. For example, it is common to order energy prices first in recursively identified VAR models of the transmission of energy price shocks. Because exactly identifying assumptions are inherently untestable, this approach in practice has required an act of faith in the empirical plausibility of the delay restriction used for identification. An alternative view that would invalidate such models is that energy prices respond instantaneously to macroeconomic news, implying that energy prices should be ordered last in recursively identified VAR models. In this paper, we propose...
How much does real GDP respond to unanticipated changes in the real price of oil? Commonly used censored VAR models suggest a substantial decline in real GDP in response to unexpected increases in the real price of oil, yet no response to unexpected declines. We show that these estimates are invalid. Based on a structural model that encompasses both symmetric and asymmetric models as special cases, correctly computed impulse responses are of roughly the same magnitude in either direction, consistent with formal tests for symmetric responses. We discuss implications for theoretical models and for policy responses to energy price shocks.