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Natural Gas and U.S. Economic Activity

Abstract:
Previous empirical work has shown that real natural gas prices have a negligible impact on total U.S. industrial production and most of its sub-indices. We reassess these conclusions using a multivariate framework and a time-frame that includes recent developments in the U.S. natural gas market. Our results show that natural gas does affect U.S. economic activity, primarily through changes in its production. The shale gas revolution has changed this relationship - a one percentage point increase in natural gas supply raises total U.S. industrial production by more after 2008 than before. Keywords: Natural gas, VAR, Shale, Endogenous, Industrial production

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DOI: 10.5547/01956574.35.3.8

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Published in Volume 35, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.