Good News Travels Fast: Global Demand Shocks, Oil Futures, and Emerging Markets Dynamics

IMF Working Papers, December 5, 2025

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Canonical URL: Good News Travels Fast: Global Demand Shocks, Oil Futures, and Emerging Markets Dynamics

Authors: Felipe Beltrán, David O Coble Fernandez, Manuel Escobar, Felipe D Rojas
Published: December 5, 2025
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798229030380.001

Research question: How do aggregate demand surprises affect and propagate to the global economy, with particular attention to their impact on Emerging Market Economies (EMEs)?
Core contribution: Introduces a new high-frequency external instrument to identify global demand shocks—the sensitivity of oil futures prices around labor market announcements from the US and the Euro Area.
Methodology: Proxy-SVAR framework using the oil-futures-based high-frequency instrument tied to labor market announcements that "consistently trigger strong revisions in global growth expectations across financial markets."

External instrument: Sensitivity of oil futures prices around US and Euro Area labor market announcements.
Rationale: Labor market announcements in the US and the Euro Area reliably move global growth expectations and thus provide variation for high-frequency identification of global demand surprises.
Empirical framework: Proxy-SVAR that leverages the external high-frequency instrument to isolate global demand shocks.

Global macro and financial responses to a positive global demand shock:
- Positive effects on world industrial production.
- Reduction in oil inventories.
- Reduction in global uncertainty.
- Improvement in financial conditions.
Responses in Emerging Market Economies (EMEs) to upward revisions in macroeconomic outlook:
- Higher industrial production.
- Higher inflation.
- Real exchange rate appreciation.
- Lower EMBI spreads.

When splitting the sample between oil-importers and oil-exporters, results indicate:
- Transmission depends on external trade exposure.
- Heterogeneity in the magnitude and persistence of responses for output, inflation, real exchange rates, and sovereign risk.
- Findings are consistent with theoretical expectations and related literature on trade exposure shaping shock transmission.

Empirical strategy: The oil-futures sensitivity around labor announcements provides a credible empirical strategy for isolating global demand shocks at high frequency.
Modeling implication: Results have direct implications for empirical macroeconomic modeling of emerging market economies, particularly for how global demand shocks should be represented and how external trade exposure should enter transmission channels.
Policy relevance: Understanding heterogeneity across oil-importers and exporters helps tailor macroeconomic and financial policy responses in EMEs when global demand surprises occur.

Source: Felipe Beltrán, David O Coble Fernandez, Manuel Escobar, and Felipe D Rojas (December 5, 2025).