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DO GLOBAL CRUDE OIL MARKET SHOCKS HAVE DIFFERENTIAL EFFECTS ON US REGIONS?

Published online by Cambridge University Press:  07 November 2017

Bebonchu Atems  and
Mark Melichar
Bebonchu Atems*
Affiliation:
Clarkson University
Mark Melichar
Affiliation:
Tennessee Technological University
*
Address correspondence to: Bebonchu Atems, School of Business, Clarkson University, 8 Clarkson Ave, Potsdam, NY 13699, USA; e-mail: batems@clarkson.edu.
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Abstract

The paper investigates whether US regions respond differently to shocks in the crude oil market. We disentangle oil market shocks into distinct demand and supply shocks and examine the response of regional personal income to these shocks. Results indicate that for most regions, oil supply shocks decrease real personal income. Except for the Rocky Mountains and the Southwest, global aggregate demand shocks are recessionary, typically about a year and a half after the shock. When we split our data into oil-producing and non-oil-producing regions, we find that global aggregate demand shocks have no effect on oil-producing regions but cause a decrease in income in non-oil-producing regions. Our analysis further indicates that oil-specific demand shocks have positive and persistent impacts on oil-producing regions but are recessionary in non-oil-producing regions. We also document significant asymmetries in the regional responses to small versus large oil shocks. In addition, the paper shows that regional differences in industrial composition explain some of the variation in the responses of real regional personal income to oil shocks.

Keywords

Oil ShocksReal Personal IncomeUS RegionsVAR Models
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 5 , July 2019 , pp. 1978 - 2008
Copyright
Copyright © Cambridge University Press 2017 

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