The macroeconomic effects of oil price uncertainty
Abdul Abiad and
Irfan Qureshi
Energy Economics, 2023, vol. 125, issue C
Abstract:
We study the impact of oil price uncertainty (OPU) on macroeconomic activity. We construct a new measure of OPU by extracting information on oil markets from 50 newspapers around the world using textual analysis techniques. Our index spikes around important historical events, such as the oil price shock of the 1970s and the supply glut of the 1980s. The effects of OPU on macroeconomic activity are captured using Bayesian vector autoregressive techniques. OPU is an important source of macroeconomic fluctuations in the US, with industrial production displaying a maximum estimated drop of 0.34% almost 10 months after impact. These negative effects are sharpened when monetary policy is constrained by the Zero-Lower Bound. OPU exerts an economically meaningful impact on global economic conditions and affects economic activity in other industrialized countries.
Keywords: Oil price uncertainty; Textual analysis; Business cycle fluctuations (search for similar items in EconPapers)
JEL-codes: E23 E32 O51 O52 Q43 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (15)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:125:y:2023:i:c:s0140988323003377
DOI: 10.1016/j.eneco.2023.106839
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