It shows dynamic responses (back to equilibrium) of key macro variables to an oil price shock. In particular, the Bundesbank identifies that an oil price shock delivers a transitory negative effect on potential production (since the model works with constant steady state values, this effect is only temporary). In addition, the more world-demand-driven oil price shocks tend to be, the less severe the impact on domestic real production tends to appear. However, it implies that a domestic reduction of aggregate demand will not trigger price dynamic moderations if oil price shocks are demand driven rather than supply-driven due to supply shortages.
