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

Martin Geiger (martin.geiger@liechtenstein-institut.li) and Jochen Güntner
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Martin Geiger: Liechtenstein-Institut, https://www.liechtenstein-institut.li/personen/dr-martin-geiger

No 2019-13, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

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.

Keywords: Business cycles; oil supply shocks; structural VAR estimation; transmission channels (search for similar items in EconPapers)
JEL-codes: C32 E30 Q41 Q43 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-ene and nep-mac
Note: English
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2019_13

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