Which Oil Shocks are Recessionary, and which are Inflationary?

The role of oil price shocks in economic activity and inflation is a controversial but key input to economic policy. To examine these relations, we employ a refined measure of oil shocks based on decomposing realized volatility and estimated using intraday oil futures data. In new results, we find that asymmetric shocks driven by oil price increases (decreases) are actually associated with rising (falling) economic activity, particularly in the US case; while a symmetric volatility channel confirms that increasing oil price volatility negatively affects economic activity, particularly for the EU. Finally, we show that the inflationary effect of rising oil prices holds not only for the US economy, but for the rest of the world.