Oil Prices and Consumption Across Countries and U.S. States

36 Pages Posted: 27 Nov 2019 Last revised: 29 Apr 2020

See all articles by Andrea De Michelis

Andrea De Michelis

Board of Governors of the Federal Reserve System

Thiago R.T. Ferreira

Board of Governors of the Federal Reserve System

Matteo Iacoviello

Board of Governors of the Federal Reserve System

Date Written: November, 2019

Abstract

We study the effects of oil prices on consumption across countries and U.S. states, by exploiting the time-series and cross-sectional variation in oil dependency of these economies. We build two large datasets: one with 55 countries over the years 1975-2018, and another with all U.S. states over the period 1989-2018. We then show that oil price declines generate positive effects on consumption in oil-importing economies, while depressing consumption in oil-exporting economies. We also document that oil price increases do more harm than the good afforded by oil price decreases both in the world and U.S. aggregates.

JEL Classification: E32, F40, Q43

Suggested Citation

De Michelis, Andrea and R.T. Ferreira, Thiago and Iacoviello, Matteo, Oil Prices and Consumption Across Countries and U.S. States (November, 2019). International Finance Discussion Paper No. 1263, Available at SSRN: https://ssrn.com/abstract=3494187 or http://dx.doi.org/10.17016/IFDP.2019.1263

Andrea De Michelis (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Thiago R.T. Ferreira

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Matteo Iacoviello

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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