The U.S. Oil Supply Revolution and the Global Economy

33 Pages Posted: 1 Feb 2016

See all articles by Kamiar Mohaddes

Kamiar Mohaddes

University of Cambridge - Faculty of Economics and Politics; University of Cambridge - Girton College

Mehdi Raissi

International Monetary Fund (IMF) - Asia and Pacific Department

Multiple version iconThere are 2 versions of this paper

Date Written: 2016-01-01

Abstract

This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the United States, using a Global VAR model estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Set-identification of the U.S. oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a U.S. supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, output declining in commodity exporters, inflation falling in most countries, and equity prices rising worldwide. Overall, our results suggest that following the U.S. oil revolution, with oil prices falling by 51 percent in the first year, global growth increases by 0.16 to 0.37 percentage points. This is mainly due to an increase in spending by oil importing countries, which exceeds the decline in expenditure by oil exporters.

JEL Classification: C32, E17, F44, F47, O13, Q43

Suggested Citation

Mohaddes, Kamiar and Raissi, Mehdi, The U.S. Oil Supply Revolution and the Global Economy (2016-01-01). Globalization and Monetary Policy Institute Working Paper No. 263, Available at SSRN: https://ssrn.com/abstract=2725021 or http://dx.doi.org/10.24149/gwp263

Kamiar Mohaddes (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

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HOME PAGE: http://people.ds.cam.ac.uk/km418

University of Cambridge - Girton College ( email )

Cambridge, CB3 0JG
United Kingdom
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HOME PAGE: http://people.ds.cam.ac.uk/km418

Mehdi Raissi

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/mehdiraissi/

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