Good News Travels Fast: Global Demand Shocks, Oil Futures, and Emerging Markets Dynamics

Felipe Beltrán, David Coble Fernandez, Manuel Escobar and Felipe Rojas

No 2025/253, IMF Working Papers from International Monetary Fund

Abstract: In this paper we study how aggregate demand surprises affect and propagate to the global economy, with particular attention to their impact on Emerging Market Economies (EMEs). To do so, we introduce a new high-frequency external instrument to identify global demand shocks: the sensitivity of oil futures prices around labor market announcements from the US and the Euro Area, two events that consistently trigger strong revisions in global growth expectations across financial markets. Using a proxy-SVAR framework, our results suggest that a global demand shock has positive effects on world industrial production, reduces oil inventories and global uncertainty, and improves financial conditions. In EMEs, upward revision in macroeconomic outlook leads to higher industrial production and inflation, real exchange rate appreciation, and lower EMBI spreads. When the sample is split between oil-importers and exporters, we observe results consistent with the role of external trade exposure in shaping transmission, heterogeneity in the magnitude and persistence of output, inflation, real exchange rates, and sovereign risk responses. These results are consistent with theoretical expectations and the related literature. Our findings offer a credible empirical strategy for isolating global demand shocks and have direct implications for empirical macroeconomic modeling of emerging market economies.

Keywords: Proxy SVAR; oil futures prices; global demand shocks; Emerging Markets; high frequency identification; labor reports releases; emerging markets dynamics; IMF working papers; oil inventory; Oil; Oil prices; Industrial production; Futures; Labor markets; Global (search for similar items in EconPapers)
Pages: 46
Date: 2025-12-05
New Economics Papers: this item is included in nep-ene, nep-ifn, nep-mac and nep-opm
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