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The Effects of Disaggregate Oil Shocks on Aggregate Expected Skewness of the United States

Author

Listed:
  • Xin Sheng

    (Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, CM1 1SQ, UK)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Qiang Ji

    (Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China)

Abstract

We analyse the impact of oil supply, global economic activity, oil-specific consumption demand, and oil inventory demand shocks on expected aggregate skewness of the United States (US) economy, obtained based on a data-rich environment involving 211 macroeconomic and financial variables over the quarterly period of 1975:Q1 to 2022:Q2. We find that positive oil supply and global economic activity shocks increase the expected macroeconomic skewness in a statistically significant manner, with the effects being relatively more pronounced in the lower-regime of the aggregate skewness factor, i.e., when the US is witnessing downside risks. Interestingly, oil-specific consumption demand and oil inventory demand shocks contain no predictive ability for the overall expected skewness. With skewness being a metric for policymakers to communicate their beliefs about the path of future risks, our results have important implications for policy decisions.

Suggested Citation

  • Xin Sheng & Rangan Gupta & Qiang Ji, 2023. "The Effects of Disaggregate Oil Shocks on Aggregate Expected Skewness of the United States," Working Papers 202302, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202302
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    Cited by:

    1. Matteo Foglia & Vasilios Plakandaras & Rangan Gupta & Elie Bouri, 2023. "Multi-Layer Spillovers between Volatility and Skewness in International Stock Markets Over a Century of Data: The Role of Disaster Risks," Working Papers 202337, University of Pretoria, Department of Economics.
    2. Afees A. Salisu & Rangan Gupta, 2023. "Oil Price Returns Skewness and Forecastability of International Stock Returns Over One Century of Data," Working Papers 202339, University of Pretoria, Department of Economics.

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    More about this item

    Keywords

    Oil shocks; Expected macroeconomic skewness; US economy; Local projection model; Impulse response functions;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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