Industry effects of oil price shocks: A re-examination

Soojin Jo, Lilia Karnizova and Abeer Reza

Energy Economics, 2019, vol. 82, issue C, 179-190

Abstract: Sectoral responses to oil price shocks help determine how these shocks are transmitted throughout the economy. Textbook treatments of oil price shocks often emphasize negative supply, or cost, effects on oil importing countries. By contrast, the seminal contribution of Lee and Ni (2002) has shown that almost all U.S. industries experience oil price shocks largely through a reduction in their respective demands. Only industries with very high oil intensities face a supply-driven reduction. In this paper, we re-examine this seminal finding using two additional decades of data. Further, we apply updated empirical methods, including structural factor-augmented vector autoregressions that take into account how industries are linked among themselves and with the remainder of the macro-economy. Our results confirm the original finding of Lee and Ni that demand effects of oil price shocks dominate in all but a handful of U.S. industries.

Keywords: Oil price shocks; Industry supply and demand; SVAR; FAVAR (search for similar items in EconPapers)
JEL-codes: E30 Q42 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Working Paper: Industry Effects of Oil Price Shocks: Re-Examination (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:82:y:2019:i:c:p:179-190

DOI: 10.1016/j.eneco.2018.12.010

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