The U.S. Oil Supply Revolution and the Global Economy

Kamiar Mohaddes and Mehdi Raissi

No 2015/259, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the United States, using a Global VAR model estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Set-identification of the U.S. oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a U.S. supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, output declining in commodity exporters, inflation falling in most countries, and equity prices rising worldwide. Overall, our results suggest that following the U.S. oil revolution, with oil prices falling by 51 percent in the first year, global growth increases by 0.16 to 0.37 percentage points. This is mainly due to an increase in spending by oil importing countries, which exceeds the decline in expenditure by oil exporters.

Keywords: WP; Tight oil; shale oil; fracking revolution; oil price decline; oil supply; global macroeconometric modeling; international business cycle; oil exporter; oil-price shock; equity price; oil importer; error correction term; oil price data; oil-price environment; standard deviation; MENA oil importer; commodity exporter; price of oil; oil price environment; Oil prices; Oil; gas and mining taxes; Oil production; Vector autoregression; Global; Middle East; North Africa (search for similar items in EconPapers)
Pages: 35
Date: 2015-12-10
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: The US oil supply revolution and the global economy (2019)
Working Paper: The U.S. Oil Supply Revolution and the Global Economy (2017)
Working Paper: The U.S. Oil Supply Revolution and the Global Economy (2016)
Working Paper: The US oil supply revolution and the global economy (2016)
Working Paper: The U.S. Oil Supply Revolution and the Global Economy (2016)
Working Paper: The U.S. oil supply revolution and the global economy (2016)
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