The Effects of Disaggregate Oil Shocks on Aggregate Expected Skewness of the United States

We analyse the impact of oil supply, global economic activity, oil-specific consumption demand, and oil inventory demand shocks on expected aggregate skewness of the United States (US) economy, obtained based on a data-rich environment involving 211 macroeconomic and financial variables over the quarterly period of 1975:Q1 to 2022:Q2. We find that positive oil supply and global economic activity shocks increase the expected macroeconomic skewness in a statistically significant manner, with the effects being relatively more pronounced in the lower-regime of the aggregate skewness factor, i.e., when the US is witnessing downside risks. Interestingly, oil-specific consumption demand and oil inventory demand shocks contain no predictive ability for the overall expected skewness. With skewness being a metric for policymakers to communicate their beliefs about the path of future risks, our results have important implications for policy decisions