Economics, Econometrics and Finance
3 years ago

Oil price shocks drive US economy: Speculation boosts prices, demand spurs growth.

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SSRN Electronic Journal
Oil Shocks and the U.S. Economy: Evidence from a FAVAR Model
Kuhelika De, Ryan A. Compton, Daniel C. Giedeman

Paper Summary

Oil price shocks affect the US economy differently based on their causes. Demand and supply-driven oil price shocks increase global oil prices and impact US consumer and producer prices. Precautionary demand shocks are the main drivers of oil price fluctuations and US price levels. Oil supply shocks lower US economic activity, while global economic activity oil demand shocks increase it. Monetary policy is needed to stabilize the impact of global oil prices on domestic inflation.

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