The Macroeconomic Effects of Oil Supply News: Evidence from OPEC Announcements

2021/03/30 by Diego R. Känzig · 12 citations
Economics, Econometrics and Finance · #Market Dynamics and Volatility #Monetary Policy and Economic Impact #Energy, Environment, Economic Growth

paper · doi:10.1257/aer.20190964

Abstract

This paper studies how changes in oil supply expectations affect the oil price and the macroeconomy. Using a novel identification design, exploiting institutional features of OPEC and high-frequency data, I identify an oil supply news shock. These shocks have statistically and economically significant effects. Negative news leads to an immediate increase in oil prices, a gradual fall in oil production, and an increase in inventories. This has consequences for the US economy: activity falls, prices and inflation expectations rise, and the dollar depreciates, providing evidence for a strong channel operating through supply expectations. (JEL E31, E32, F31, Q35, Q38, Q43)

Citations

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