The asymmetry puzzle: the supply chain disruptions news shocks effects on oil prices and inflation

Luis Antonio Puch González and Jesús Ruiz

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper investigates the asymmetrical effects of supply chain disruptions on oil prices and inflation. To this purpose, we identify anticipated (news) shocks associated to the global supply chain. Then we estimate the effects of these shocks on oil prices and inflation in the US. We allow 'escalating' (restrictive) and 'deescalating' (expansionary) supply chain news shocks tohave differing effect sizes. Our empirical findings reveal that anticipated supply chain disruptions exert a substantial and statistically significant influence on both oil prices and inflation. We uncover a significant asymmetry in these effects: 'escalating news' shocks exhibit a markedly stronger and more persistent impact compared to 'deescalating news' shocks. Consequently, the oil price is less sensitive to an alleviation of supply chain strain than to an exacerbation. Our results can be rationalized by a small open economy model which is used to assess the validity of our empirical approach. Furthermore, we demonstrate that the mechanisms governing thetransmission of supply chain news shocks in the model align closely with observed empirical patterns. Failing to account for this asymmetry could lead to misjudgments regarding the repercussions of supply chain pressures.

Keywords: News; shocks; Inflation; Oil; prices; Supply; chain; disruption; Expectations (search for similar items in EconPapers)
JEL-codes: E2 E32 E44 E6 Q42 Q43 Q58 (search for similar items in EconPapers)
Date: 2024-02-28
New Economics Papers: this item is included in nep-dge, nep-ene and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:43758

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