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The macroeconomic effects of oil price shocks why are the 2000s so different from the 1970s by Olivier Blanchard

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Published by Massachusetts Institute of Technology, Dept. of Economics in Cambridge, MA .
Written in English


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About the Edition

We characterize the macroeconomics performance of a set of industrialized economies in the aftermath of the oil price shocks of the 1970s and of the last decade, focusing on the differences across episodes. We examine four different hypotheses for the mild effects on inflation and economic activity of the recent increase in the price of oil: (a) good luck (i.e. lack of concurrent adverse shocks), (b) smaller share of oil in production, (c) more flexible labor markets, and (d) improvements in monetary policy. We conclude that all four have played an important role. Keywords: oil, oil price, inflation, credibility, oil share, Great moderation, supply shocks, stagflation, monetary policy, real wage rigidities. JEL Classifications: E20, E32, E52.

Edition Notes

Statement[by] Olivier J. Blanchard [and] Jordi Gal.̕
SeriesWorking paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 07-21 [2008 revision], Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 07-21, 2008.
ContributionsGal,̕ Jordi, 1961-, Massachusetts Institute of Technology. Dept. of Economics
The Physical Object
Pagination75 p. :
Number of Pages75
ID Numbers
Open LibraryOL24647857M
OCLC/WorldCa670721218

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  Given the macroeconomic developments that followed the oil shocks of the s, the substantial rise in oil prices since has generated concerns about the prospects for growth and inflation and raised related questions about the appropriate way for monetary and energy policies to Cited by: 1. Introduction. A proper understanding of the effects of oil price shocks on the business cycle and consumer prices is crucial for the optimal conduct of fiscal and monetary policy, especially in times of a sharp rise or fall in oil prices (Bodenstein et al, , Kilian, Lewis, ).Cited by:   We examine four different hypotheses for the mild effects on inflation and economic activity of the recent increase in the price of oil: (a) good luck (i.e. lack of concurrent adverse shocks), (b) smaller share of oil in production, (c) more flexible labor markets, and (d) Cited by: Real effects are asymmetric and increase with the magnitude of the shock. Recessionary effects are triggered by oil price hikes and the recent slump. The recent slump is also causing deflation risk and financial by:

  It is found that oil prices Granger cause macroeconomic activities. Evidence of asymmetric impact of oil price shocks on industrial growth is found. Oil price shocks negatively affects the growth of industrial production and we find that an hundred percent increase in oil prices lowers the growth of industrial production by one by: We examine four different hypotheses for the mild effects on inflation and economic activity of the recent increase in the price of oil: (a) good luck (i.e. lack of concurrent adverse shocks), (b) smaller share of oil in production, (c) more flexible labor markets, and (d) improvements in monetary by: To preview the results, this paper has the following findings. First, the asymmetric effects of oil price shock on macroeconomic activity are significant evident, against the conclusions obtained from Kilian and Vigfusson (). Rising oil price has a negative effect on output, gross saving, employee's payrolls, housing price, consumer expectation and etc., while has a positive effect on Fed Funds Cited by: The Interaction between Oil Price and Economic Growth Article (PDF Available) in Review of Middle East Economics and Finance 13(13) January w Reads How we measure 'reads'.

Oil prices shocks have a stagflationary effect on the macroeconomy of an oil importing country: they slow down the rate of growth (and may even reduce the level of output – i.e. cause a recession) and they lead to an increase in the price level and potentially an increase in the inflation Size: 67KB. This paper is the first quantifies the oil price shock intensity, and verifies the hypothesis that macroeconomic impacts of oil price shocks are depended on shock intensity. At the same time, the empirical results demonstrate that it is reasonable to combine HHT with event study in evaluating the macroeconomic effects of oil price shocks on by: effect of changes in oil prices on U.S. economic activity, focusing on how runups in the price of oil can affect output growth and inflation. He also discusses the channels by which oil-price increases might affect the economy and the historical evidence on the relationship between oil prices, economic growth, and inflation. economic downturns. Downloadable! We characterize the macroeconomic performance of a set of industrialized economies in the aftermath of the oil price shocks of the s and of the last decade, focusing on the differences across episodes. We examine four different hypotheses for the mild effects on inflation and economic activity of the recent increase in the price of oil: (a) good luck (i.e. lack of concurrent.