Oil and Macroeconomic (In)stability

Hilde Bjørnland (), Vegard Larsen and Junior Maih

American Economic Journal: Macroeconomics, 2018, vol. 10, issue 4, 128-51

Abstract: We analyze the role of oil price volatility in reducing U.S. macroeconomic instability. Using a Markov Switching Rational Expectation New-Keynesian model we revisit the timing of the Great Moderation and the sources of changes in the volatility of macroeconomic variables. We find that smaller or fewer oil price shocks did not play a major role in explaining the Great Moderation. Instead oil price shocks are recurrent sources of economic fluctuations. The most important factor reducing overall variability is a decline in the volatility of structural macroeconomic shocks. A change to a more responsive (hawkish) monetary policy regime also played a role.

JEL-codes: E12 E32 E52 Q35 Q43 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mac.20150171
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Citations: View citations in EconPapers (43)

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Related works:
Working Paper: Oil and macroeconomic (in)stability (2017)
Working Paper: Oil and macroeconomic (in)stability (2017)
Working Paper: Oil and macroeconomic (in)stability (2016)
Working Paper: Oil and macroeconomic (in)stability (2015)
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