New working paper: "When OPEC Speaks: The Dollar's Evolving Reaction to Oil Supply News in the Age of Shale"

Over the past two decades, the dollar-oil correlation moved from negative to positive as the U.S. became a net petroleum exporter. The paper studies whether the dollar's response to OPEC announcements changed with this transition. In a daily event study, the reaction to lower-than-expected oil supply news turns from depreciation to appreciation. Structural time-varying-parameter VARs indicate that the reversal is gradual and parallels a terms-of-trade response that stops deteriorating. Interacted panel local projections tie this time variation to U.S. petroleum trade and response differentials between commodity importerexporter currencies. The evidence suggests a shale-era change in the transmission of oil supply news.

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