Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications

Abstract Using oil futures, we examine expectation formation and how it alters the macroeconomic transmission of shocks. Our empirical framework, where investors learn about persistence oil-price movements, successfully replicates fluctuations in futures since Late 1990s. By embedding this learning mechanism an estimated model, document that increase TFP-driven demand largely accounts for investors' perceptions movements became increasingly permanent during 2000s. Learning impact shocks, making responses time dependent conditional on shocks' likely persistence.