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After an unprecedented decline from 2014 to 2016, the real price of oil more than doubled, renewing interest in the effects of oil price fluctuations on the U.S. economy. The oil sector has become increasingly important to the U.S. economy over the past decade, and total U.S. business fixed investment appears to have followed oil investment’s pattern in recent years. This positive correlation between oil prices and U.S. investment growth may be related to the surge in U.S. oil production known as the shale boom.

Nida Çakır Melek explores the effect of unexpected oil price changes (or “shocks”) on U.S. investment and examines whether this effect changed after the shale boom. She finds that U.S. investment has become more responsive to demand shocks and less responsive to oil supply shocks since the shale boom. In addition, she finds that oil investment has become more responsive to oil supply and demand shocks since the boom. Her results suggest that the shale boom led to greater spillovers from the oil sector to the aggregate economy.

Publication information: 4th Quarter 2018
Updated December 10, 2018, to correct axis labels and titles in Charts 2–4
DOI: 10.18651/ER/4q18CakirMelek


Nida Çakır Melek

Senior Economist

Nida Çakır Melek is a senior economist in the Economic Research Department of the Federal Reserve Bank of Kansas City. She joined the Bank in August 2013 after receiving her Ph.D…