Abstract:
We examine the impact of the global economic activity, oil supply, oil-specific consumption
demand, and oil inventory demand shocks on the expected aggregate skewness of the United States
(US) economy, obtained based on a data-rich environment involving 211 macroeconomic and financial
variables in 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
way, 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.
