Effects of oil market sentiment on macroeconomic variables

Abstract

This paper aims to evaluate the effects of oil price shocks on macroeconomic variables, for the economies of the United States and Brazil. We develop a variable that measures the volatility of oil prices, from a textual sentiment analysis. We evaluate oil price shocks using the Local Projection method. Our results suggest that changes in oil prices cause larger impacts on the US economy, compared to the effects on the Brazilian economy. The responses of the US and Brazilian variables were similar when using the sentiment indicator or the VIX volatility index. Finally, we find that decreasing the frequency of the variables, together with changing the method, does not change the response trajectories of the macroeconomic variables.