News Shocks in Open Economies: Evidence from Giant Oil Discoveries
By Rabah Arezki, V. Ramey, Liugang Sheng. Social Science Research Network, 2015
258 citations recorded by the source corpus.
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.
Subfields: Communication, Sociology and Political Science
View Paper: https://www.semanticscholar.org/paper/126f742746eb86b04c51e7d8b7716ddbdcfb2d79
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Citations in the corpus
- The Impact of Natural Resources: Survey of Recent Quantitative Evidence (2017, methodology): “Arezki, Ramey, and Sheng (2015) use a novel dataset on giant oil discoveries (that is, at least 500 million ultimately recoverable barrels with median net present value of 6.6% of GDP) to isolate the precise timing when expectations change and estimate the magnitude of these anticipation effects at…”