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

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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.

Citation

Känzig, Diego R. 2021. "The Macroeconomic Effects of Oil Supply News: Evidence from OPEC Announcements." American Economic Review, 111 (4): 1092-1125. DOI: 10.1257/aer.20190964

Additional Materials

JEL Classification

  • E31 Price Level; Inflation; Deflation
  • E32 Business Fluctuations; Cycles
  • F31 Foreign Exchange
  • Q35 Hydrocarbon Resources
  • Q38 Nonrenewable Resources and Conservation: Government Policy
  • Q43 Energy and the Macroeconomy