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

December 10, 2015

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Format: Chicago

Kamiar Mohaddes, and Mehdi Raissi. The U.S. Oil Supply Revolution and the Global Economy, (USA: International Monetary Fund, 2015) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Commodities, Econometric analysis, Oil, Oil prices, Oil production, Oil, gas and mining taxes, Prices, Production, Taxes, Vector autoregression

Keywords: Commodity exporter, Equity price, Error correction term, Fracking revolution, Gas and mining taxes, Global, Global macroeconometric modeling, International business cycle, MENA oil importer, Middle East, North Africa, Oil, Oil exporter, Oil importer, Oil price data, Oil price decline, Oil price environment, Oil prices, Oil production, Oil supply, Oil-price environment, Oil-price shock, Price of oil, Shale oil, Standard deviation, Tight oil, Vector autoregression, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/259
Stock No:

WPIEA2015259
ISBN:

9781513509846
ISSN:

1018-5941

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