TY  - RPRT
        AU  - Broer, Tobias
AU  - Kramer, John
AU  - Mitman, Kurt
        TI  - The Distributional Effects of Oil Shocks
        PY  - 2025/Jun/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 17949
        UR  - https://www.iza.org/publications/dp17949
        AB  - Negative oil supply shocks since the 1980s have increased German inflation and reduced aggregate economic activity. Using 45 years of high-frequency German administrative data, we find that these shocks disproportionally harm low-income individuals: their earnings growth falls by two percentage points two years after a 10-percent exogenous oil price rise, while high-income individuals are largely unaffected. Job-finding probabilities for low-income workers also decline significantly.  This contrasts with the distributional effects of monetary policy shocks, which, while also stronger at the bottom, primarily impact job-separation probabilities. To understand the role of monetary policy in shaping these outcomes, we analyze counterfactual scenarios of policy non-response. Because the actual policy response to oil shocks involves an initial rate rise followed by a fall, a fully anticipated non-response (McKay-Wolf, 2023) leaves the oil shock's aggregate and distributional effects little changed. When monetary policy repeatedly surprises by not reacting (Sims-Zha, 2006), in contrast, the implied initial monetary loosening dominates, boosting activity, inflation, and particularly employment prospects for low-income individuals.
        KW  - monetary policy
KW  - inequality
KW  - Oil shocks
KW  - counterfactual
        ER  -