OIL PRICE VOLATILITY AND THE MACROECONOMY

Recent theoretical work suggests that oil price shocks may have an adv erse impact on the macroeconomy, not only because they increase the le vel of oil prices, but also because they raise oil price volatility. T his paper provides empirical support for this proposition by showing t hat oil price volatility, measured by monthly standard deviations of d aily oil prices, helps to forecast aggregate output movements in the U .S. Moreover, part of the asymmetric relationship between oil price ch anges and output growth found in previous studies can be explained by the economy's response to oil price volatility.