Current Working Papers
How Times Have Changed: The Impact of the 2026 Iran War on the U.S. Economy
Joint with Lutz Kilian and Alexander Richter.
Abstract: The 2026 Iran war has raised the question of how exposed the U.S. economy is to geopolitical oil supply disruptions. It is widely believed that the U.S. economy has become less vulnerable to such disruptions as it has reduced its dependence on oil and changed from a major net oil importer to a net oil exporter. We develop a two-country model of the global economy with large geopolitical oil supply disruptions that distinguishes between the U.S. economy and the rest of the world. We find that the response of U.S. real GDP growth to the disruption in global oil supplies today is only one-twentieth of what it would have been in 1980. Moreover, the response of U.S. real GDP growth today is only one-sixth of the decline in the rest of the world.
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Unpublished Manuscripts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.