The Macroeconomic Effects of Oil Supply News: Evidence from OPEC Announcements

92 Pages Posted: 16 Jun 2018 Last revised: 31 Dec 2020

Date Written: June 1, 2018

Abstract

This paper proposes a novel approach to study the macroeconomic effects of oil prices, exploiting institutional features of OPEC and high-frequency data. Using variation in futures prices around OPEC announcements as an instrument, 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 U.S. economy: activity falls, prices and inflation expectations rise, and the dollar depreciates – providing evidence for a strong channel operating through supply expectations.

Keywords: Business Cycles, Oil Supply, News Shocks, External Instruments, High-Frequency Identification, OPEC Announcements

JEL Classification: C32, E31, E32, Q43

Suggested Citation

Känzig, Diego R., The Macroeconomic Effects of Oil Supply News: Evidence from OPEC Announcements (June 1, 2018). Available at SSRN: https://ssrn.com/abstract=3185839 or http://dx.doi.org/10.2139/ssrn.3185839

Diego R. Känzig (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

HOME PAGE: http://https://www.diegokaenzig.com/

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