The Impact of Oil Price Shocks on the U.S. Stock Market: A Note on the Roles of U.S. and Non-U.S. Oil Production

Kang, Wensheng; Ratti, Ronald A.; Vespignani, Joaquin L.

doi:10.24149/gwp249

Cited by 4 publications

(5 citation statements)

References 7 publications

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“…al. (2016) [27] find that a positive U.S. supply shock had a positive effect on U.S. stock returns using a structural VAR approach. 2 Langer et al (2016) [31] analyze the lifting of the export ban using a numerical, partial equilibrium model.…”

Section: Introductionmentioning

confidence: 99%

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The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis

2017

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This paper examines the effects of the U.S. shale oil boom in a two-country DSGE model where countries produce crude oil, refined oil products, and a non-oil good. The model incorporates different types of crude oil that are imperfect substitutes for each other as inputs into the refining sector. The model is calibrated to match oil market and macroeconomic data for the U.S. and the rest of the world (ROW). We investigate the implications of a significant increase in U.S. light crude oil production similar to the shale oil boom. Consistent with the data, our model predicts that light oil prices decline, U.S. imports of light oil fall dramatically, and light oil crowds out the use of medium crude by U.S. refiners. In addition, fuel prices fall and U.S. GDP rises. We then use our model to examine the potential implications of the former U.S. crude oil export ban. The model predicts that the ban was a binding constraint in 2013 through 2015. We find that the distortions introduced by the policy are greatest in the refining sector. Light oil prices become artificially low in the U.S., and U.S. refineries produce inefficiently high amount of refined products, but the impact on refined product prices and GDP are negligible.

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Section: Introductionmentioning

confidence: 99%

“…Using a VAR model, Mohaddes and Raissi (2016) [36] show that the oil supply shock increased global GDP by 0.16 to 0.37 percentage points. Kang et. al.…”

Section: Introductionmentioning

confidence: 99%

The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis

2017

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“…The escalating demand of oil has exerted significant pressures on oil market, particularly impacting the movements of oil price (OP). The increasing fluctuations in oil prices and their broader implications on economy have enticed the attention of researchers and policy makers (Lee et al, 1995;Sadorsky, 1999;Park & Ratti, 2008;Apergis & Miller, 2009;Hamilton, 2009;Narayan et al, 2014;Narayan & Gupta, 2015;Ghosh & Kanjilal, 2016;Ahmadi et al, 2016;Kang et al, 2016;Lee et al, 2017Zhang & Baek, 2022;Garzon Antonio´ & HierroLuis, 2022;K.S & Ray, 2023). Consequently, the empirical inquiries linking oil prices and exchange rates are extensive and diverse, yet, inconclusive.…”

Section: Introductionmentioning

confidence: 99%

Do Exchange Rates Respond Asymmetrically to Crude Oil Market Shocks? Insights from BRICS and Pakistan

Rashid,

Jehan,

Tahira

et al. 2024

Zagreb International Review of Economics and Business

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The shocks in the crude oil market are unlikely to have symmetric impacts on exchange rates, especially over various time periods. Furthermore, in low- and high-volatility regimes, exchange rates are predicted to respond differently to oil market shocks. By employing Markov-switching model and state-space model, this research empirically investigates whether oil market shocks exert asymmetric impacts on exchange rates, across the time and across different levels of volatility. In doing so, the study utilizes monthly data from January 1994-September 2017 for BRICS countries and Pakistan. The findings indicate that although oil supply shocks are mostly insignificant, oil price shocks appear statistically significant to affect the exchange rates whereas aggregate demand shocks are most volatile and are more likely to cause exchange rate fluctuations. The study concludes that various forms of oil shocks have a wide range of consequences on exchange rate determinations. Nonetheless, exchange rates’ response to oil shocks differ dramatically through low- and high-volatility states, implying that oil shocks exert a time-varying impact on exchange rates. Finally, the findings provide credence to the phenomenon of asymmetry in exchange rate responses to oil market shocks.

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“…They argue that crude oil is better hedged by investing in the stocks of oil-exporting countries than by investing in the stocks of oil-importing countries. Using a structural VAR model, Kang et al (2016) study the impact of supply and demand shocks hitting the oil market on US bond index real returns. They find that a positive specific oil-market demand shock reduces US bond real returns for eight months, while a positive innovation in aggregate demand negatively influences US bond index real returns for 24 months.…”

Section: Introductionmentioning

confidence: 99%

New insights into the US stock market reactions to energy price shocks

Benkraiem

Lahiani

Miloudi

et al. 2018

Journal of International Financial Markets, Institutions and Mo

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This paper investigates the relationship between S&P 500 prices, viewed as a US economic barometer, and a set of energy prices, including WTI, gasoline, heating, diesel and natural gas prices, using the Quantile Autoregressive Distributed Lags (QARDL) model recently developed by Cho et al. (2015). The empirical results show a negative long-and shortrun relationship between WTI crude oil and Henry Hub natural gas prices on the one side and S&P 500 stock prices on the other side, only for medium and high quantiles. The findings of Wald tests indicate a nonlinear and asymmetric pass-through from energy price shocks to aggregate US stock market prices. These results show that crude oil and natural gas are key economic variables to explain short run and long run stock market dynamics. They provide further insights into how energy price shocks are transmitted to stock market prices.

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The Impact of Oil Price Shocks on the U.S. Stock Market: A Note on the Roles of U.S. and Non-U.S. Oil Production

Cited by 4 publications

References 7 publications

The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis

The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis

Do Exchange Rates Respond Asymmetrically to Crude Oil Market Shocks? Insights from BRICS and Pakistan

New insights into the US stock market reactions to energy price shocks

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