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Oil Supply and Demand Shocks: Evidence from the Stock Market

, University of California Berkeley

, University of 黑料传送门 Booth

Oil price changes have a strong impact on macroeconomic aggregates. Hamilton (2011) observes that 10 out of the 11 postwar recessions were preceded by a sharp increase in the price of oil. Fluctuations in oil prices are, however, endogenous and can arise due to changes in the supply of oil such as political uncertainties and wars in the Middle East or due to changes in the demand for oil due to strong global growth. The aim of the paper is to theoretically propose and empirically test a novel identification scheme based on sign restrictions on the contemporaneous conditional correlation between stock returns and oil future returns.