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The asymmetry puzzle: the supply chain disruptions news shocks effects on oil prices and inflation

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  • Puch González, Luis Antonio
  • Ruiz, Jesús

Abstract

This paper investigates the asymmetrical effects of supply chain disruptions on oil prices and inflation. To this purpose, we identify anticipated (news) shocks associated to the global supply chain. Then we estimate the effects of these shocks on oil prices and inflation in the US. We allow 'escalating' (restrictive) and 'deescalating' (expansionary) supply chain news shocks tohave differing effect sizes. Our empirical findings reveal that anticipated supply chain disruptions exert a substantial and statistically significant influence on both oil prices and inflation. We uncover a significant asymmetry in these effects: 'escalating news' shocks exhibit a markedly stronger and more persistent impact compared to 'deescalating news' shocks. Consequently, the oil price is less sensitive to an alleviation of supply chain strain than to an exacerbation. Our results can be rationalized by a small open economy model which is used to assess the validity of our empirical approach. Furthermore, we demonstrate that the mechanisms governing thetransmission of supply chain news shocks in the model align closely with observed empirical patterns. Failing to account for this asymmetry could lead to misjudgments regarding the repercussions of supply chain pressures.

Suggested Citation

  • Puch González, Luis Antonio & Ruiz, Jesús, 2024. "The asymmetry puzzle: the supply chain disruptions news shocks effects on oil prices and inflation," UC3M Working papers. Economics 43758, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:43758
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    Keywords

    News shocks;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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