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Working Paper
Industry Effects of Oil Price Shocks: Re-Examination
Sectoral responses to oil price shocks help determine how these shocks are transmitted through the economy. Textbook treatments of oil price shocks often emphasize negative supply effects on oil importing countries. By contrast, the seminal contribution of Lee and Ni (2002) has shown that almost all U.S. industries experience oil price shocks largely through a reduction in their respective demands. Only industries with very high oil intensities face a supply-driven reduction. In this paper, we re-examine this seminal findings using two additional decades of data. Further, we apply updated ...
Working Paper
How Oil Shocks Propagate: Evidence on the Monetary Policy Channel
Using high-frequency responses of oil futures prices to prominent oil market news, we estimate the effects of oil supply news shocks when systematic monetary policy is switched off by the zero lower bound (ZLB) and when it is not (normal periods) in Japan, the United Kingdom, and the United States. We find that negative oil supply news shocks are less contractionary (and even expansionary) at the ZLB compared to normal periods. Inflation expectations increase during both periods, while the short nominal interest rates remain constant at the ZLB, pointing to the importance of monetary policy ...
Working Paper
Do oil endowment and productivity matter for accumulation of international reserves?
We develop a dynamic stochastic optimization model with oil price shocks to show that countries with certain combinations of oil endowment and productivity have strong precautionary incentives to accumulate foreign reserves in response to oil price shocks. Using the Simulated Method of Moments to estimate the model we demonstrate how oil price shocks are absorbed by changes in foreign reserves which, in turn, leads to less variation in aggregate consumption. Along with productivity and oil endowment, we also consider as determinants of reserves holding conventional variables such as trade- ...
Journal Article
Do Adverse Oil Price Shocks Change Loan Contract Terms for Energy Firms?
This article examined whether the relationship between creditworthiness and loan spreads for energy firms in the syndicated loan market changed after the 2014 oil-price shock. {{p}} The authors use syndicated loans, which are jointly funded by several financial institutions, because the syndicated loan market is a major source of debt financing for oil firms. Credit conditions tightened following the oil-price shock in mid-2014.
Working Paper
The US Banks’ Balance Sheet Transmission Channel of Oil Price Shocks
We document the existence of a quantitative relevant banks' balance-sheet transmission channel of oil price shocks by estimating a dynamic stochastic general equilibrium model with banking and oil sectors. The associated amplification mechanism implies that those shocks explain a non-negligible share of US GDP growth fluctuations, up to 17 percent, instead of 6 percent absent the banking sector. Also, they mitigated the severity of the Great Recession’s trough. GDP growth would have been 2.48 percentage points more negative in 2008Q4 without the beneficial effect of low oil prices. The ...