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Identification of expectational shocks in the oil market using OPEC announcements

Author

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  • Riccardo Degasperi

    (Bank of Italy)

Abstract

OPEC announcements reveal unanticipated information about future oil supply but may also lead imperfectly informed markets to revise their beliefs about demand conditions. As a result, surprises in oil futures prices around these announcements capture both a supply and a demand shock. Imposing an additional restriction on the sign of the comovement between oil futures surprises and stock price surprises results in clean instruments that separately identify these two components. A negative oil supply news shock has deep and long-lasting stagflationary effects, stronger than previously reported. This poses a challenge for monetary authorities and underscores the importance of accounting for information effects when identifying news shocks.

Suggested Citation

  • Riccardo Degasperi, 2026. "Identification of expectational shocks in the oil market using OPEC announcements," Temi di discussione (Economic working papers) 1516, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1516_26
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2026/2026-1516/en_tema_1516.pdf
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    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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