How do Firms react to Surprising Changes in Demand? a Vector Autoregressive Analysis using Business Survey Data

Abstract

The proportion of liquid fuels excise and royalties raised from each of crude oil and petroleum products has also varied considerably, and changed particularly dramatically during 1986-87 (Figure 2). These changes have been induced variously by movements in volumes produced and demanded and by policy decisions affecting import parity prices and tax rates. For example, it is clear from Figure 3 that the dramatic fall in crude oil revenue can be associated with falls in all three of the import parity price, the crude oil levy rate, and the production of indigenous crude. But in Figure 4, the corresponding substantial increase in products revenue is most closely aligned with an increased excise rate.