International Finance Discussion Papers (IFDP)

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November 2019

Oil Prices and Consumption across Countries and U.S. States

Andrea De Michelis, Thiago R. T. Ferreira, and Matteo Iacoviello

Abstract:

We study the effects of oil prices on consumption across countries and U.S. states, by exploiting the time-series and cross-sectional variation in oil dependency of these economies. We build two large datasets: one with 55 countries over the years 1975-2018, and another with all U.S. states over the period 1989-2018. We then show that oil price declines generate positive effects on consumption in oil-importing economies, while depressing consumption in oil-exporting economies. We also document that oil price increases do more harm than the good afforded by oil price decreases both in the world and U.S. aggregates.

Keywords: Oil prices, consumption, cross-country, U.S. states, oil dependency

DOI: https://doi.org/10.17016/IFDP.2019.1263

PDF: Full Paper

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Last Update: January 09, 2020