Working Papers

2020-33 | October 2020


Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications


Using expectations embodied in oil futures prices, we examine how expectations are formed and how they affect the macroeconomic transmission of shocks. We show that an empirical framework in which investors form expectations by learning about the persistence of oil-price movements successfully replicates the fluctuations in oil-price futures since the late 1990s. We then embed this learning mechanism in a model with oil usage and storage. Estimating the model, we document that an increase in the persistence of TFP-driven fluctuations in oil demand largely account for investors' perceptions that oil-price movements became increasingly permanent during the 2000s before declining thereafter. We show that the presence of learning alters the macroeconomic impact of shocks, making the responses time-dependent and conditional on the views of economic agents about the shocks' likely persistence.

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Article Citation

Leduc, Sylvain, Kevin Moran, and Robert J. Vigfusson. 2020. "Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications," Federal Reserve Bank of San Francisco Working Paper 2020-33. Available at