Affiliation:
1. London Business School (email: )
Abstract
This paper studies how changes in oil supply expectations affect the oil price and the macroeconomy. Using a novel identification design, exploiting institutional features of OPEC and high-frequency data, I identify an oil supply news shock. These shocks have statistically and economically significant effects. Negative news leads to an immediate increase in oil prices, a gradual fall in oil production, and an increase in inventories. This has consequences for the US economy: activity falls, prices and inflation expectations rise, and the dollar depreciates, providing evidence for a strong channel operating through supply expectations. (JEL E31, E32, F31, Q35, Q38, Q43)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
144 articles.
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