NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Liugang Sheng

Department of Economics
Chinese University of Hong Kong
Shatin, N.T.
Hong Kong
Tel: 852-3943-8231
Fax: 852-2603-5805

E-Mail: lsheng@cuhk.edu.hk

NBER Working Papers and Publications

January 2015News Shocks in Open Economies: Evidence from Giant Oil Discoveries
with Rabah Arezki, Valerie A. Ramey: w20857
This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output–the delay between a discovery and production is on average 4 to 6 years. We first present a two-sector small open economy model in order to predict the responses of macroeconomic aggregates to news of an oil discovery. We then estimate the effects of giant oil discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil discovery, the current account and saving rate decline for the first 5 years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, while GDP does not...

Published: Rabah Arezki & Valerie Ramey & Liugang Sheng, 2015. "News Shocks in Open Economies: Evidence from Giant Oil Discoveries," IMF Working Papers, vol 15(209).

 
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