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Asymmetric Transmission of Oil Supply News

Author

Listed:
  • Mario Forni
  • Alessandro Franconi
  • Luca Gambetti
  • Luca Sala

Abstract

We investigate the asymmetric transmission of oil supply news shocks to the U.S. economy using a nonlinear Proxy-SVAR framework. Building on the methodology of Debortoli et al. (2023), we identify exogenous oil supply news shocks using high-frequency surprises in oil futures prices around OPEC announcements (Känzig, 2021). Our results reveal strong evidence of asymmetries: a positive oil supply news shock, which raises oil prices, produces a large and persistent contraction in real activity and only a modest and transitory increase in prices. Conversely, a negative shock that reduces oil prices has small real effects but triggers a sizeable and persistent decline in inflation. We rationalize these asymmetric effects through the behavior of uncertainty. We show that both positive and negative shocks increase financial uncertainty and the excess bond premium, leading to higher risk premia and delaying investment decisions through “real option” effects. This uncertainty channel amplifies the contractionary impact of positive shocks while dampening the expansionary effects of negative shocks on output, with the opposite pattern observed for prices. We find little evidence of an asymmetric response of monetary policy.

Suggested Citation

  • Mario Forni & Alessandro Franconi & Luca Gambetti & Luca Sala, 2025. "Asymmetric Transmission of Oil Supply News," Working papers 1020, Banque de France.
    • Handle: RePEc:bfr:banfra:1020
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    File URL: https://www.banque-france.fr/system/files/2025-11/WP1020.pdf
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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