News Shocks in Open Economies : Evidence from Giant Oil Discoveries
Author/Editor: Rabah Arezki, Valerie A Ramey, Liugang Sheng
Release Date: © September, 2015
ISBN
: 978-1-51354-315-4
Stock #: WPIEA2015209
English
Stock Status: On back-order
Languages and formats available
English | French | Spanish | Arabic | Russian | Chinese | Portuguese | |
Paperback | Yes | ||||||
Yes | |||||||
ePub | Yes | ||||||
Mobipocket | Yes |
Description
This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output ? the delay between a discovery and production is on average 4 to 6 years. We first present a two-sector small open economy model in order to predict the responses of macroeconomic aggregates to news of an oil discovery. We then estimate the effects of giant oil discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil discovery, the current account and saving rate decline for the first 5 years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, while GDP does not increase until after 5 years. Employment rates fall slightly for a sustained period of time.
More publications in this series: Working Papers
More publications by: Rabah Arezki ; Valerie A Ramey ; Liugang Sheng