Current Working Papers
The Declining Impact of Geopolitical Oil Supply Disruptions on the U.S. Economy
Joint with Lutz Kilian and Alexander Richter.
Abstract: It is widely believed that the U.S. economy has become less vulnerable to geopolitical oil supply disruptions, yet the extent of this change and the underlying economic mechanisms remain an open question. This paper develops a two-country model of the U.S. economy and the rest of the world with large geopolitical oil supply disruptions. We find that the response of U.S. real GDP growth to a 15% disruption in global oil supplies today is about one-fifteenth of what it would have been in 1980. The declining impact is driven by the interaction between the U.S. becoming a net oil exporter and the reduction in the oil expenditure share. Neither change alone can explain the full decline. Recalibrating the model for Europe, we find that the U.S. response today is only one-fourth of the European response, reflecting the continued reliance of Europe on oil imports.
The Impact of the 2026 Iran War on U.S. Inflation: A Scenario Analysis
Joint with Lutz Kilian, Alexander Richter and Xiaoqing Zhou.
[Latest Working Paper] [VOX Article]
Abstract: This paper shows how to assess the inflationary impact of the rise in the price of oil caused by the 2026 Iran War. We first generate projections of the quarterly price of oil from a calibrated DSGE model of the global economy under a range of scenarios and then incorporate these projections into a monthly VAR model of the impact of U.S. gasoline price shocks on inflation and inflation expectations. Our analysis speaks to the magnitude and persistence of the impact of higher oil prices on headline and core PCE inflation and on household inflation expectations.
Geopolitical Oil Price Risk and Economic Fluctuations
Joint with Lutz Kilian and Alexander Richter.
[Latest Working Paper] [Working Paper Appendix]
Abstract: Market participants and policymakers are concerned about major oil production shortfalls driven by geopolitical events. Even when such events never materialize, unanticipated increases in the probability of a production shortfall may generate a surge in the price of oil and oil price uncertainty. Our analysis provides the first systematic account of the quantitative importance of time-varying geopolitical risk to oil production for the global economy. We quantify the impact of actual and anticipated global oil production shortfalls on the price of oil and global growth, including the 2026 closure of the Strait of Hormuz, under alternative scenarios.
Unpublished Manuscripts
"Time-varying Oil Price Volatility and Macroeconomic Aggregates.” Joint with Nora Traum.