Asymmetric Transmission of Oil Supply News

Mario Forni, Alessandro Franconi, Luca Gambetti and Luca Sala

Working papers from Banque de France

Abstract: We investigate the asymmetric transmission of oil supply news shocks to the U.S. economy using a nonlinear Proxy-SVAR framework. Building on the methodology of Debortoli et al. (2023), we identify exogenous oil supply news shocks using high-frequency surprises in oil futures prices around OPEC announcements (Känzig, 2021). Our results reveal strong evidence of asymmetries: a positive oil supply news shock, which raises oil prices, produces a large and persistent contraction in real activity and only a modest and transitory increase in prices. Conversely, a negative shock that reduces oil prices has small real effects but triggers a sizeable and persistent decline in inflation. We rationalize these asymmetric effects through the behavior of uncertainty. We show that both positive and negative shocks increase financial uncertainty and the excess bond premium, leading to higher risk premia and delaying investment decisions through “real option” effects. This uncertainty channel amplifies the contractionary impact of positive shocks while dampening the expansionary effects of negative shocks on output, with the opposite pattern observed for prices. We find little evidence of an asymmetric response of monetary policy.

Keywords: Oil Supply News; Nonlinear Proxy-SVAR; Asymmetry (search for similar items in EconPapers)
JEL-codes: C32 E31 E32 Q43 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2025
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Related works:
Journal Article: Asymmetric transmission of oil supply news (2025)
Working Paper: Asymmetric Transmission of Oil Supply News (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:1020

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