Nonlinear analysis reveals that oil supply shocks have uneven impacts on real activity and prices in the US economy.
We provide new evidence on the asymmetries in the transmission of oil supply news shocks in the US using a nonlinear Proxy‐SVAR. A shock that increases oil prices has large and persistent effects on real activity and relatively small effects on prices. On the contrary, a shock that reduces oil prices has smaller real effects and large effects on prices. We rationalize these findings through the behavior of uncertainty: uncertainty increases independently of the sign of the shock, amplifying the contractionary real effects of a positive shock and dampening the expansionary real effects of a negative shock. The opposite holds for prices. We find little evidence of an asymmetric response of monetary policy.
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Forni et al. (2025) studied this question.
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