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Unlike existing works, we isolate global oil demand shocks, associated with a global real economic activity factor, from oil demand shocks originating specifically from developed and emerging economies, associated with real economic activity factors within these two groups of economies. The paper uses a structural factor\u2010augmented vector autoregression (FAVAR) model with latent global and specific factors to model crude oil demand and supply. To identify the shocks, we extract real economic activity factors from a large panel of emerging and developed economies' real activity variables using a two\u2010level factor model. The paper shows how structural shocks can be identified by solving equations that arise from economically meaningful zero restrictions on the impact matrix of the reduced\u2010form FAVAR model innovations. The empirical application shows that identifying the international oil demand shocks based on the global and specific latent factors is essential to appropriately quantify their heterogeneous impacts on these factors, the crude oil production, and the real oil price.<\/jats:p>","DOI":"10.1002\/jae.3017","type":"journal-article","created":{"date-parts":[[2023,12,8]],"date-time":"2023-12-08T03:23:20Z","timestamp":1702005800000},"page":"128-149","update-policy":"http:\/\/dx.doi.org\/10.1002\/crossmark_policy","source":"Crossref","is-referenced-by-count":0,"title":["Identifying oil price shocks with global, developed, and emerging latent real economy activity factors"],"prefix":"10.1002","volume":"39","author":[{"given":"Antoine A.","family":"Djogbenou","sequence":"first","affiliation":[{"name":"Department of Economics York University  Toronto Ontario Canada"}],"role":[{"role":"author","vocabulary":"crossref"}]}],"member":"311","published-online":{"date-parts":[[2023,12,7]]},"reference":[{"key":"e_1_2_8_2_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.eneco.2014.07.006"},{"key":"e_1_2_8_3_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.2406"},{"key":"e_1_2_8_4_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.1159"},{"key":"e_1_2_8_5_1","doi-asserted-by":"publisher","DOI":"10.1080\/01621459.2016.1195743"},{"key":"e_1_2_8_6_1","doi-asserted-by":"publisher","DOI":"10.3982\/ECTA14690"},{"key":"e_1_2_8_7_1","article-title":"Oil price shocks in major emerging economies","volume":"43","author":"Azad N. 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