Oil price shocks and the U.S. economy: where does the asymmetry originate?

Rising oil prices appear to retard aggregate U.S. economic activity by more than falling oil prices stimulate it. Past research suggests adjustment costs and/or monetary policy may be possible explanations ofthe asymmetric response. This paper uses a quasi-vector autoregressive model of U. S. economy to examine from where the asymmetry might originate. The analysis uses counterfactual impulse response experiments to detennine that monetary policy alone cannot account for the asymmetry. The robustness ofshort-lived asymmetry across the base case and counterfactuals is consistent with the adjustment-cost explanation.