The Effects of Disaggregate Oil Shocks on 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, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China

No 202302, Working Papers from University of Pretoria, Department of Economics

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.

Keywords: Oil shocks; Expected macroeconomic skewness; US economy; Local projection model; Impulse response functions (search for similar items in EconPapers)
JEL-codes: C23 D81 Q41 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2023-01
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (2)

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