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How are oil supply shocks transmitted to the U.S. economy?

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Abstract

We investigate how oil supply shocks are transmitted to U.S. economic activity, consumer prices, and interest rates. Using a structural VAR approach with a combination of sign and zero restrictions, we distinguish between supply and demand channels in the transmission of exogenous changes in crude oil production. We nd that the adverse e ects of negative oil supply shocks are transmitted mainly through the demand side, as both output and interest rates react more strongly to oil supply shocks that shift the U.S. aggregate demand curve, while the supply side matters in transmitting oil supply shocks to consumer prices.

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  • Martin Geiger & Jochen Güntner, 2019. "How are oil supply shocks transmitted to the U.S. economy?," Economics working papers 2019-13, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2019_13
    Note: English
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    References listed on IDEAS

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    More about this item

    Keywords

    Business cycles; oil supply shocks; structural VAR estimation; transmission channels;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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