We make use of new methodological advances in quantifying oil supply and monetary policy\r\nshocks that are exogenous with respect to macroeconomic conditions to examine the response\r\nof state economies to these shocks. Our approach is parsimonious and straightforward: once\r\nexogenous oil supply shocks and monetary policy shocks have been identified, the dynamic\r\nresponse of state economies to exogenous shocks can be analyzed directly using ordinary\r\nleast squares (OLS) and other conventional methods of inference. The fact that no identifying\r\nassumptions are required makes our findings invariant to different identification schemes.\r\nResults indicate that an exogenous monetary policy shock typically causes a decrease in real\r\npersonal income. The paper also documents a fair degree of similarity in the response of real\r\npersonal income to exogenous oil supply across many states. Like the aggregate response,\r\nfollowing an exogenous oil supply shock, real personal income decreases in many states.
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