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

Xin Sheng, Rangan Gupta and Qiang Ji ()
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Xin Sheng: Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford CM1 1SQ, UK
Qiang Ji: Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China

Risks, 2023, vol. 11, issue 11, 1-9

Abstract: We examine the impact of the global economic activity, oil supply, oil-specific consumption demand, and oil inventory demand shocks on the expected aggregate skewness of the United States (US) economy, obtained based on a data-rich environment involving 211 macroeconomic and financial variables in 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 way, 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.

Keywords: oil shocks; expected macroeconomic skewness; US economy; local projection model; impulse response functions (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
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Working Paper: The Effects of Disaggregate Oil Shocks on Aggregate Expected Skewness of the United States (2023)
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