What do firm managers tell us about the transmission channels of oil price shocks?

Arbeitspapier

In this paper, we investigate the transmission channels of oil price shocks using a factorial survey. We confront CEOs and CFOs of a representative sample of firms with a hypothetical vignette in which the oil price rises exogenously above managers' baseline expectations. The managers then estimate the short- and medium-term cost, price, and output effects of the shock on their firms. We find that the managers expect the shock to have very different effects on their firms: the cross-sectional distributions of the responses are large, skewed, and have fat tails. Higher firm-specific energy input costs lead managers to expect greater output losses and sales price increases. Higher market power accelerates this input cost effect. Another important determinant is managers' pre-shock uncertainty about business prospects. The importance of the three channels varies considerably across industries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KOF Working Papers ; No. 507

Classification and Topics

• Classification: Wirtschaft ; Survey Methods; Sampling Methods ; Firm Behavior: Empirical Analysis ; Expectations; Speculations ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles
• Subject: Oil price shocks ; transmission channels ; firms ; expectations ; surveys ; vignettes

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Drechsel, Dirk ; Mikosch, Heiner ; Sarferaz, Samad ; Bannert, Matthias
• Event: Veröffentlichung
• (who): ETH Zurich, KOF Swiss Economic Institute
• (where): Zurich
• (when): 2022

Further information

• DOI: doi:10.3929/ethz-b-000584846
• Handle: http://hdl.handle.net/10419/278237
• Last update: 10.03.2025, 11:44 AM CET