Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?

Lutz Kilian

doi:10.1162/rest.90.2.216

Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?

¹ Federal Reserve Bank of Dallas · ² University of Michigan–Ann Arbor · ³ Centre for Economic Policy Research · ⁴ Center for Economic and Policy Research

The Review of Economics and Statistics 2008 open access

The paper proposes a new measure of exogenous oil supply shocks. The timing, the magnitude, and the sign of this measure may differ greatly from current state-of-the-art estimates. It is shown that only a small fraction of the observed oil price increases during oil crisis periods can be attributed to exogenous oil production disruptions. Exogenous oil supply shocks cause a sharp drop of U.S. real GDP growth after five quarters rather than an immediate and sustained reduction in economic growth and a spike in CPI inflation after three quarters. Overall, exogenous oil supply shocks made remarkably little difference for the evolution of the U.S. economy since the 1970s, although they did matter for some historical episodes.

DOI: 10.1162/rest.90.2.216
Volume: 90 (2)
Pages: 216-240
Language: en
Export: BibTeX
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