News Shocks in Open Economies: Evidence from Giant Oil Discoveries

Rabah Arezki, Valerie Ramey and Liugang Sheng

The Quarterly Journal of Economics, 2017, vol. 132, issue 1, 103-155

Abstract: This article explores the effect of news shocks in open economies using worldwide giant oil and gas discoveries as a directly observable measure of news shocks about future output—the delay between a discovery and production is on average four to six years. We first analyze the effects of a discovery in a two-sector small open economy model with a resource sector. We then estimate the effects of giant oil and gas discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil or gas discovery, the current account and saving rate decline for the first five years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, whereas GDP does not increase until after five years. Employment rates fall slightly and remain low for a sustained period.

JEL-codes: E00 F3 F4 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (162)

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Related works:
Working Paper: News Shocks in Open Economies: Evidence from Giant Oil Discoveries (2015)
Working Paper: News Shocks in Open Economies: Evidence from Giant Oil Discoveries (2015)
Working Paper: News Shocks in Open Economies: Evidence from Giant Oil Discoveries (2015)
Working Paper: News Shocks in Open Economies: Evidence from Giant Oil Discoveries (2015)
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The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

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