Oil Shocks and the Business Cycle in Europe
Baltasar Manzano,
Carlos de Miguel and
José Mô Martín Moreno
No 215, Studies on the Spanish Economy from FEDEA
Abstract:
This paper analyzes the effects of oil price shocks on the business cycle of the EU-15 countries using a standard dynamic general equilibrium model for a small open economy in which oil is included as an imported productive input. The results show that oil shocks can account for a significant percentage of GDP fluctuations in many of those countries. Furthermore, we show that the increases in the relative price of oil had a negative effect on welfare, particularly in southern European countries, which are historically associated with a lax monetary policy during oil crisis.
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Chapter: Oil shocks and the business cycle in Europe (2006) 
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